Norwegian Cruise Posts Huge 3Q Loss; Shares Rise On Recovery Hopes

Norwegian Cruise Line’s earnings slipped to an adjusted loss per share of $2.35 in the third quarter from an adjusted EPS of $2.23 in the year-ago quarter as the COVID-19 pandemic crushed the demand for the cruise line industry. The 3Q loss was higher than analysts’ expectation of a loss per share of $2.25.

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However, shares are up 4.5% in pre-market trading today following a 26.8% rise on Monday (Nov. 9) in reaction to the favorable update on Pfizer and BioNTech’s COVID-19 vaccine.

Meanwhile, Norwegian’s (NCLH) 3Q revenue fell drastically to $6.52 million from $1.91 billion in 3Q19 due to the complete suspension of voyages in the quarter. Analysts forecasted revenue of $10.6 million. The company ended the quarter with total debt of $10.9 billion and cash and cash equivalents of $2.4 billion.

“We are focused on positioning the Company to not only withstand an extended COVID-19 disruption but to emerge from this period with a clear path for long-term financial recovery,” stated CFO Mark A. Kempa.

The CFO further added, “Our swift actions to adapt to this unprecedented environment by reducing costs, conserving cash and enhancing our liquidity profile will bolster our efforts to navigate through COVID-19, relaunch our vessels and, over the longer-term, optimize our balance sheet and resume our consistent track record of strong financial performance.” (See NCLH stock analysis on TipRanks)

Looking ahead, the company expects the monthly average cash burn rate to be higher in 4Q due to additional costs associated with re-staffing as vessels are prepared to return to service, re-positioning and provisioning of vessels, implementation of new health and safety protocols and a disciplined ramp-up of demand-generating marketing investments.

The company also said that the overall cumulative booked position for the first half of 2021 remains below historical ranges due to the current health crisis. However, bookings for the second half of next year are in line with historical ranges. Norwegian Cruise stated that pent-up future demand for cruising was reflected in the record booking achievements in September and October.

Last month, Deutsche Bank analyst Chris Woronka reiterated a Hold rating for Norwegian Cruise, and peers Carnival and Royal Caribbean. Woronka noted that since June, the cruise stocks have had a sizable negative correlation to COVID news flow. He stated that the pandemic will continue to be a drag on the industry as it likely puts a damper on consumers’ willingness to book cruises, even for mid-late 2021.

However, Woronka added that any breakthroughs in vaccination efforts could offset the near-term “jitters” about rising case counts.

The Street is also sidelined on Norwegian Cruise. It has a Hold analyst consensus based on 2 Buys, 4 Holds and 1 Sell. Shares have plunged 63.1% so far this year and the $18.75 average analyst price target indicates further downside of 12.8% from the current levels.