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Category: Stock Market and Norwegian Cruise Line Holdings
Date: 26 February 2020 Stock Price: $39.31 We take a look at the 4th quarter earnings report of their 2019 fiscal year of Norwegian Cruise Line Holdings, who no matter what their 4th quarter earnings report looks like is getting hammered by the markets as the fear of Coronavirus spreading and the impact it will have on tourism and travel the world over is hurting travel and tourism related stocks such as Norwegian Cruise Line Holdings.
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About Norwegian Cruise Line Holdings
Norwegian Cruise Line Holdings Ltd. (NYSE: NCLH) is a leading global cruise company which operates the Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises brands. With a combined fleet of 28 ships with approximately 59,150 berths, these brands offer itineraries to more than 490 destinations worldwide. The Company will introduce nine additional ships through 2027.
Overview of Norwegian Cruise Line's 4th quarter 2019 earnings report
Data below refers to the latest quarter's data unless specified otherwise
- Total revenue: $1.480 billion (up from $1.381 billion for the same quarter of the previous year)
- Total revenue increased by 7.16% over the last 12 months
- Total cruise operating expenses: $887.422 million (up from $817.258 million for the same quarter of the previous year)
- Total cruise operating expenses increased by 8.58% over the last 12 months
- Some margin squeeze being experienced by Norwegian Cruise Line Holdings as their revenues grew at a slower rate than their expenses
- Net income: $121.297 million (down from $154.634 million for the same quarter of the previous year)
- Diluted earnings per share: $0.56 (down from $0.70 for the same quarter of the previous year)
- PE ratio of Norwegian Cruise Line Holdings: 9.14
- Diluted number of shares in issue: 214.772 million (down from 221.443 million for the same quarter of the previous year)
- Cash and cash equivalents: $252.876 million
- Cash and cash equivalents per share: $1.17
- Cash and cash equivalents makes up 2.99% of Norwegian Cruise Line Holdings market capital
- Cash and cash equivalents makes up 1.51% of Norwegian Cruise Line Holdings total assets
- Goodwill in Norwegian Cruise Line Holdings: $1.388 billion
- Goodwill per Norwegian Cruise Line Holdings stock: $6.46
- Goodwill makes up 8.32% of Norwegian Cruise Line Holdings' total assets
- Goodwill per Norwegian Cruise Line Holdings stock: $6.46
- Stockholders equity in Norwegian Cruise Line Holdings: $6.515 billion
- Stockholders equity per share: $30.33
- Norwegian Cruise Line Holdings is trading at 1.29 times its stockholders equity per share which is well outside the expected range of between 2 and 4 times that most firms tend to trade at
Norwegian Cruise Line's management commentary on their 4th quarter 2019 earnings
MIAMI, Feb. 20, 2020 (GLOBE NEWSWIRE) -- Norwegian Cruise Line Holdings Ltd. (NYSE: NCLH) (together with NCL Corporation Ltd., “Norwegian Cruise Line Holdings”, “Norwegian” or the “Company”) today reported financial results for the fourth quarter and full year ended December 31, 2019, as well as provided guidance for the first quarter and full year 2020.
Full Year 2020 Expectations
“I am pleased to announce that Norwegian Cruise Line Holdings’ business model once again demonstrated its resilience in the face of significant exogenous headwinds by delivering yet another successful year in 2019, which included the sixth consecutive year of record revenue and earnings per share and seventh consecutive year of Net Yield growth,” said Frank Del Rio, president and chief executive officer of Norwegian Cruise Line Holdings Ltd. “As a result of the strong global demand for cruises witnessed throughout 2019, we entered 2020 in the best booked position and at prices higher than last year’s record levels. This trend continued through late January until the COVID-19 outbreak began having an adverse impact on our business. We have taken several proactive measures to protect the health and safety of our guests and crew throughout our fleet, including implementing strict protocols regarding passenger embarkation, and in an abundance of caution have cancelled or modified several voyages in the Asia region through the third quarter of this year. While the effect of these impacts cannot be fully quantified at this time, our Company has an exemplary track record of demonstrating its resilience in challenging environments and we remain confident in our ability to deliver strong financial performance over the long-term.”
Full Year 2020 Expectations
- Company entered year with a record booked position and at higher pricing. Despite the current known impact from the COVID-19 coronavirus outbreak, as of the week ending February 14, 2020, the Company’s booked position remained ahead of prior year and at higher prices on a comparable basis, which excludes cruises to Cuba in the prior year and the recent redeployment of Norwegian Spirit from Asia in the current year.
- Excluding both known and unknown impacts from the COVID-19 outbreak, Adjusted EPS for full year 2020 is expected to be in the range of $5.40 to $5.60 reflecting 2.0% to 3.0% Constant Currency Net Yield growth.
- The current known direct impact to operations from COVID-19 is expected to be approximately $0.75 per share and primarily includes customer incentive compensation and 40 cancelled, modified or redeployed Asia voyages across the Company’s three brands. This includes the close-in redeployment of 21 cancelled Asia voyages on Norwegian Spirit which have been redeployed to the Eastern Mediterranean for summer 2020 with an extremely condensed booking window.
- The COVID-19 outbreak continues to impact consumer travel sentiment regarding travel for cruises in Asia and throughout the Company’s areas of operation worldwide. The duration and extent of this indirect impact cannot be quantified at this time and is therefore not included in the approximately $0.75 known direct impact outlined above.
- Prior to COVID-19, the Company was on a solid trajectory to achieve its Full Speed Ahead 2020 Targets established at its May 2018 Investor Day. Given the known and quantifiable direct impact of COVID-19 to-date of approximately $0.75, the Company does not anticipate achieving these targets by year-end but remains committed to expanding Adjusted ROIC, growing Adjusted EPS, maintaining a strong balance sheet and returning capital to shareholders.
First quarter 2020 Adjusted EPS is expected to be approximately $0.48 reflecting approximately 0.25% Constant Currency Net Yield growth. This guidance excludes known and unknown impacts from the COVID-19 outbreak in the quarter. - Company launched Regent’s Seven Seas Splendor, the second ship in the highly successful Explorer Class. Captain Serena Melani, a 30-year veteran, will helm the ship and was the first woman in cruise industry history to captain a brand-new ocean cruise ship at launch.
- Continued expansion of the Company’s global sustainability program, Sail & Sustain, with the creation of a new ESG department solely focused on further developing the Company’s ESG strategy.
- Company to debut new dedicated flagship terminal at PortMiami, the “Pearl” of Miami.
“I am pleased to announce that Norwegian Cruise Line Holdings’ business model once again demonstrated its resilience in the face of significant exogenous headwinds by delivering yet another successful year in 2019, which included the sixth consecutive year of record revenue and earnings per share and seventh consecutive year of Net Yield growth,” said Frank Del Rio, president and chief executive officer of Norwegian Cruise Line Holdings Ltd. “As a result of the strong global demand for cruises witnessed throughout 2019, we entered 2020 in the best booked position and at prices higher than last year’s record levels. This trend continued through late January until the COVID-19 outbreak began having an adverse impact on our business. We have taken several proactive measures to protect the health and safety of our guests and crew throughout our fleet, including implementing strict protocols regarding passenger embarkation, and in an abundance of caution have cancelled or modified several voyages in the Asia region through the third quarter of this year. While the effect of these impacts cannot be fully quantified at this time, our Company has an exemplary track record of demonstrating its resilience in challenging environments and we remain confident in our ability to deliver strong financial performance over the long-term.”
2020 Outlook
“2020 was set to be a banner year buoyed by the introduction of our two newest vessels, Norwegian Encore and Regent’s Seven Seas Splendor, which are already making significant contributions to our bottom line,” said Mark A. Kempa, executive vice president and chief financial officer of Norwegian Cruise Line Holdings Ltd. “We have an exciting growth profile with nine ships on order over the next seven years which will further amplify our ability to generate cash through revenue and earnings growth. We are confident in the strength of the core fundamentals that drive our business and remain committed to expanding Adjusted ROIC, growing earnings, maintaining a strong balance sheet and returning capital to shareholders over the long-term.”
COVID-19 Coronavirus Update
The Company has proactively implemented several preventative measures to reduce potential exposure and transmission of COVID-19 and to protect the health, safety, security and well-being of its guests and crew. These measures include enhanced pre-boarding and onboard health protocols that go above and beyond standard operating procedures. Any guest or crew who have traveled to China, Hong Kong or Macau in the past 30 days, regardless of nationality, are not allowed to board the Company’s vessels. Certain itineraries have been modified and the Company has the flexibility to alter additional voyages as needed.
Out of an abundance of caution and as a result of the uncertainty surrounding port entry and berthing availability in various destinations in Asia, the Company has made the prudent decision to cancel all voyages in Asia across its three brands. A total of 40 voyages have been canceled, modified or redeployed including 24 voyages on Norwegian Cruise Line, 10 on Oceania Cruises and 6 on Regent Seven Seas Cruises. Following these changes, the Company will not have any vessels deployed in Asia through the end of the third quarter 2020.
At this time, the known direct impact to full year 2020 Adjusted EPS is expected to be approximately $0.75 and is excluded from the Company’s first quarter and full year 2020 guidance. This direct impact primarily includes customer incentive compensation and 40 cancelled, modified or redeployed Asia voyages across the Company’s three brands. This includes the close-in redeployment of 21 cancelled Asia voyages on Norwegian Spirit which have been redeployed to the Eastern Mediterranean for summer 2020 with an extremely condensed booking window.
Due to the fluidity and uncertainty as to the duration and extent of the outbreak, it is too early for the Company to fully quantify impacts from broader headwinds to its business resulting from decreased demand for travel and tourism globally. The Company’s financial performance could be materially impacted if travel restrictions and COVID-19 concerns continue for an extended period of time.
“2020 was set to be a banner year buoyed by the introduction of our two newest vessels, Norwegian Encore and Regent’s Seven Seas Splendor, which are already making significant contributions to our bottom line,” said Mark A. Kempa, executive vice president and chief financial officer of Norwegian Cruise Line Holdings Ltd. “We have an exciting growth profile with nine ships on order over the next seven years which will further amplify our ability to generate cash through revenue and earnings growth. We are confident in the strength of the core fundamentals that drive our business and remain committed to expanding Adjusted ROIC, growing earnings, maintaining a strong balance sheet and returning capital to shareholders over the long-term.”
COVID-19 Coronavirus Update
The Company has proactively implemented several preventative measures to reduce potential exposure and transmission of COVID-19 and to protect the health, safety, security and well-being of its guests and crew. These measures include enhanced pre-boarding and onboard health protocols that go above and beyond standard operating procedures. Any guest or crew who have traveled to China, Hong Kong or Macau in the past 30 days, regardless of nationality, are not allowed to board the Company’s vessels. Certain itineraries have been modified and the Company has the flexibility to alter additional voyages as needed.
Out of an abundance of caution and as a result of the uncertainty surrounding port entry and berthing availability in various destinations in Asia, the Company has made the prudent decision to cancel all voyages in Asia across its three brands. A total of 40 voyages have been canceled, modified or redeployed including 24 voyages on Norwegian Cruise Line, 10 on Oceania Cruises and 6 on Regent Seven Seas Cruises. Following these changes, the Company will not have any vessels deployed in Asia through the end of the third quarter 2020.
At this time, the known direct impact to full year 2020 Adjusted EPS is expected to be approximately $0.75 and is excluded from the Company’s first quarter and full year 2020 guidance. This direct impact primarily includes customer incentive compensation and 40 cancelled, modified or redeployed Asia voyages across the Company’s three brands. This includes the close-in redeployment of 21 cancelled Asia voyages on Norwegian Spirit which have been redeployed to the Eastern Mediterranean for summer 2020 with an extremely condensed booking window.
Due to the fluidity and uncertainty as to the duration and extent of the outbreak, it is too early for the Company to fully quantify impacts from broader headwinds to its business resulting from decreased demand for travel and tourism globally. The Company’s financial performance could be materially impacted if travel restrictions and COVID-19 concerns continue for an extended period of time.
Norwegian Cruise Line (NYSE: NCLH) stock price history
The image below, obtained from Google, shows the stock price history of Norwegian Cruise Line Holdings over the last 5 years. And its not been a very good time for Norwegian Cruise Line Holdings investors over the last 5 years. 5 years ago Norwegian Cruise Line Holdings stock was trading at around $49.31 a share and its currently trading at $39.31 a stock. That's a loss of -20.3% suffered by Norwegian Cruise Line Holdings stockholders over the last 5 years. But one has to remember the stock has dropped by 51% since 17 January 2020.
The stock of Norwegian Cruise Line Holdings is trading at a lot closer to its 52 week low of $39.18 than it is to its 52 week high of $59.78 which to us is a clear indication that the short term momentum and sentiment of Norwegian Cruise Line Holdings stock is very negative right now mostly driven by Coronavirus fears and the impact that Coronavirus will have on the group's future earnings.
The stock of Norwegian Cruise Line Holdings is trading at a lot closer to its 52 week low of $39.18 than it is to its 52 week high of $59.78 which to us is a clear indication that the short term momentum and sentiment of Norwegian Cruise Line Holdings stock is very negative right now mostly driven by Coronavirus fears and the impact that Coronavirus will have on the group's future earnings.
Recent coverage of Norwegian Cruise Line
The extract below discusses the meltdown of Shake Shack stock price following their earnings release as obtained from TheStreet.com
Cruise ship company stock prices sank Monday amid a larger market rout triggered by escalating fears over the spread of the coronavirus beyond China.
Shares of Norwegian Cruise Line Holdings (NCLH) , Carnival (CCL) and Royal Caribbean (RCL) each fell by more than 5% as the number of Covid-19 cases and deaths in South Korea, Italy and Iran escalated, fueling fears of a global pandemic.
Norwegian led the way down, with shares of the cruise ship company plunging 6.98% to $43.69 a share, followed by Carnival, which dropped 5.85% to $39.25 a share. Royal Caribbean fell 5.33% to $100.34 a share. Norwegian last week reported better-than-expected results for the fourth quarter, beating analysts' estimates on both earnings and revenue. But the cruise line giant was less sanguine about the impact of the coronavirus on its bottom line in the future, leaving investors scrambling for the lifeboats.
The coronavirus has forced Norwegian to either outright cancel, alter or redeploy 40 different cruises, with the company pulling the plug on all cruises in Asia through the end of the third quarter this year, according to Zacks Investment Research.
Read the full article here
Cruise ship company stock prices sank Monday amid a larger market rout triggered by escalating fears over the spread of the coronavirus beyond China.
Shares of Norwegian Cruise Line Holdings (NCLH) , Carnival (CCL) and Royal Caribbean (RCL) each fell by more than 5% as the number of Covid-19 cases and deaths in South Korea, Italy and Iran escalated, fueling fears of a global pandemic.
Norwegian led the way down, with shares of the cruise ship company plunging 6.98% to $43.69 a share, followed by Carnival, which dropped 5.85% to $39.25 a share. Royal Caribbean fell 5.33% to $100.34 a share. Norwegian last week reported better-than-expected results for the fourth quarter, beating analysts' estimates on both earnings and revenue. But the cruise line giant was less sanguine about the impact of the coronavirus on its bottom line in the future, leaving investors scrambling for the lifeboats.
The coronavirus has forced Norwegian to either outright cancel, alter or redeploy 40 different cruises, with the company pulling the plug on all cruises in Asia through the end of the third quarter this year, according to Zacks Investment Research.
Read the full article here
Norwegian Cruise Line (NYSE: NCLH) stock valuation
Based on Norwegian Cruise Line Holdings latest earnings report and their fiscal guidance provided as well as their quantifiable impact of the Coronavirus on their 2020 fiscal year earnings what do we value their stock at? Based on the earnings reported and the fiscal guidance provided our valuation model provides a target price (full value price) for Norwegian Cruise Line Holdings stock at $55.40 a stock (and this is with our worst case Coronavirus estimate stating that Coronavirus will lose the group 20% of their 2020 fiscal year earnings).
We therefore believe that stock of Norwegian Cruise Line Holdings is undervalued. And this is largely driven by the fear and uncertainty in the market surrounding the Coronvirus which saw the group's stock decline from around our target price levels in mid January 2020 to its current levels. We do believe the market is overreacting and that the group's earnings will remain relatively stable and that the Coronavirus to shall pass, but as we said earlier the valuation above assumes that the group will lose 20% of their expected 2020 earnings to the Coronavirus.
We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target price which in this case is $55.40. We therefore believe a good entry point into the stock of Norwegian Cruise Line Holdings is at $49.90 or below.
Since the stock of Norwegian Cruise Line Holdings is trading at well below our recommended entry point into the stock we rate the stock of Norwegian Cruise Line Holdings as a buy. But this call is only for investors willing to sit on the stock for a prolonged period and wait for the Coronavirus to pass, which could be a while. But we believe the strong drop in Norwegian Cruise Line Holdings stock in recent weeks has created a good buying opportunity for those looking for quality assets at depressed prices.
We therefore believe that stock of Norwegian Cruise Line Holdings is undervalued. And this is largely driven by the fear and uncertainty in the market surrounding the Coronvirus which saw the group's stock decline from around our target price levels in mid January 2020 to its current levels. We do believe the market is overreacting and that the group's earnings will remain relatively stable and that the Coronavirus to shall pass, but as we said earlier the valuation above assumes that the group will lose 20% of their expected 2020 earnings to the Coronavirus.
We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target price which in this case is $55.40. We therefore believe a good entry point into the stock of Norwegian Cruise Line Holdings is at $49.90 or below.
Since the stock of Norwegian Cruise Line Holdings is trading at well below our recommended entry point into the stock we rate the stock of Norwegian Cruise Line Holdings as a buy. But this call is only for investors willing to sit on the stock for a prolonged period and wait for the Coronavirus to pass, which could be a while. But we believe the strong drop in Norwegian Cruise Line Holdings stock in recent weeks has created a good buying opportunity for those looking for quality assets at depressed prices.
Next earnings release of Norwegian Cruise Line
It is expected that Norwegian Cruise Line Holdings will release their 1st quarter 2020 earnings report in late May 2020