Norwegian Cruise Line Holdings (NCLH) exceeded earnings expectations in the third quarter, showcasing strong demand in the industry. However, the company has revised its full-year outlook due to concerns about the Israel-Hamas conflict.
The cruise operator has decided to cancel all visits to Israel for the remainder of 2023, as well as potential visits for the entirety of 2024. This decision comes as a response to the ongoing conflict, highlighting the company’s commitment to safety and security.
The news caused a slight decline in Norwegian’s stock, which fell by 2.6% ahead of Wednesday’s market opening.
Before the Israel-Hamas conflict, approximately 7% of Norwegian’s cruise trips in the fourth quarter and 4% in 2024 were planned for the Middle East region. The cancellation of these trips will undoubtedly impact the company’s financial performance.
For the current quarter, Norwegian expects to report an adjusted loss of 15 cents per share, a significant departure from the analysts’ consensus for a 2 cents-per-share profit. Furthermore, the company has adjusted its full-year profit guidance to 73 cents per share, down from the previous prediction of 80 cents. Analysts surveyed by FactSet had anticipated a profit of 78 cents per share.
In addition to the conflict-related challenges, Norwegian has faced other obstacles affecting its bookings. The recent wildfires in Maui have led to lower-than-expected bookings for trips to Hawaii in the current quarter. Furthermore, there has been a decrease in last-minute demand for certain “longer and exotic” voyages.
Despite these setbacks, Norwegian performed well in the third quarter, reporting adjusted earnings of 76 cents per share, with record revenue of $2.5 billion. This surpassed analysts’ expectations of earnings of 68 cents per share on revenue of $2.5 billion, according to FactSet.
Although Norwegian’s stock has experienced an 11% increase thus far in 2023, it has fallen by 40% since its peak in July. The cruise industry as a whole had a prosperous first half of the year fueled by increased international travel. However, as summer draws to a close and fuel prices rise, cruise stocks have faced considerable declines.
On the other hand, Norwegian’s rival, Royal Caribbean, enjoyed a strong third quarter and raised its full-year profit forecast following its recent earnings report. Royal Caribbean’s fuel costs for the third quarter were lower than anticipated. However, the positive news had minimal impact on Royal Caribbean stock, which only increased by 0.8% on the day.