Norwegian Cruise sails south as higher costs hit Q3 profit target
Reuters
Published Aug 01, 2023 07:35AM ET
Updated Aug 01, 2023 12:00PM ET
By Granth Vanaik
(Reuters) -Norwegian Cruise Line on Tuesday forecast downbeat third-quarter profit after a strong second quarter, as elevated costs offset gains from robust demand and higher ticket prices, sending the company's shares tumbling down as much as 16.7%.
While higher costs have hounded most cruise operators, they have also benefited from pent-up demand for leisure travel, with many picking cruises that offer a range of fun activities under one-roof over costlier land-based vacations.
Rival Royal Caribbean (NYSE:RCL) last week forecast an upbeat third-quarter profit as well as lifted its annual profit expectations.
Truist Securities analyst Patrick Scholes said Royal Caribbean's results set the bar very high for Norwegian, and so a slight raise to annual adjusted EBITDA guidance disappointed investors.
Norwegian Cruise forecast its annual adjusted EBITDA, a key measure of profitability, between $1.85 billion and $1.95 billion, up from $1.80 billion to $1.95 billion previously.
It also now expects 2023 adjusted profit of 80 cents per share, up from 75 cents.
But for the third-quarter, its adjusted profit forecast of 70 cents per share came below analysts' average estimate of 79 cents.
Despite undertaking price hikes on its itineraries, Norwegian Cruise has been bogged down by inflation and higher labor costs.
Rival Carnival (NYSE:CCL) has also forecast third-quarter profit below estimates on higher costs.
Shares of Carnival and Royal Caribbean were down about 6% and 3%, respectively.
Norwegian's total cruise operating expenses in the June quarter jumped 29% to $1.38 billion. To reduce the costs, the company is re-engineering food menu items and optimizing crew movements.
"We're just maybe in the fourth innings of this cost reduction strategy... we still believe there are more efforts ahead," CEO Harry Sommer said.
Norwegian's second-quarter revenue rose to $2.21 billion, above estimates of $2.17 billion, while adjusted profit of 30 cents per share beat expectations of 27 cents, according to Refinitiv.
Get The News You Want
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.