Stock Story -
Cruise company Norwegian Cruise Line (NYSE:NCLH) reported results in line with analysts' expectations in Q2 CY2024, with revenue up 7.6% year on year to $2.37 billion. It made a non-GAAP profit of $0.40 per share, improving from its profit of $0.30 per share in the same quarter last year.
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Norwegian Cruise Line (NCLH) Q2 CY2024 Highlights:
- Revenue: $2.37 billion vs analyst estimates of $2.38 billion (small miss)
- EPS (non-GAAP): $0.40 vs analyst estimates of $0.34 (16.7% beat)
- EPS (non-GAAP) Guidance for Q3 CY2024 is $0.92 at the midpoint, above analyst estimates of $0.91
- Management raised its full-year EPS (non-GAAP) guidance to $1.53 at the midpoint, a 15.9% increase
- Gross Margin (GAAP): 38.7%, up from 37.3% in the same quarter last year
- Free Cash Flow of $330.2 million, down 39.8% from the previous quarter
- Passenger Cruise Days: 6.08 million at quarter end
- Market Capitalization: $7.96 billion
With amenities like a full go-kart race track built into its ships, Norwegian Cruise Line (NYSE:NCLH) is a premier global cruise company.
Hotels, Resorts and Cruise LinesHotels, resorts, and cruise line companies often sell experiences rather than tangible products, and in the last decade-plus, consumers have slowly shifted from buying "things" (wasteful) to buying "experiences" (memorable). In addition, the internet has introduced new ways of approaching leisure and lodging such as booking homes and longer-term accommodations. Traditional hotel, resorts, and cruise line companies must innovate to stay relevant in a market rife with innovation.
Sales GrowthA company's long-term performance is an indicator of its overall business quality. While any business can experience short-term success, top-performing ones enjoy sustained growth for multiple years. Over the last five years, Norwegian Cruise Line grew its sales at a weak 7.6% compounded annual growth rate. This shows it failed to expand in any major way and is a rough starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new property or emerging trend. Norwegian Cruise Line's annualized revenue growth of 96.6% over the last two years is above its five-year trend, suggesting its demand recently accelerated. Note that COVID hurt Norwegian Cruise Line's business in 2020 and part of 2021, and it bounced back in a big way thereafter.
This quarter, Norwegian Cruise Line grew its revenue by 7.6% year on year, and its $2.37 billion of revenue was in line with Wall Street's estimates. Looking ahead, Wall Street expects sales to grow 5.9% over the next 12 months, a deceleration from this quarter.
Cash Is KingIf you've followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills.
While Norwegian Cruise Line posted positive free cash flow this quarter, the broader story hasn't been so clean. Over the last two years, Norwegian Cruise Line's demanding reinvestments to stay relevant have drained its resources. Its free cash flow margin was among the worst in the consumer discretionary sector, averaging negative 6.2%.
Norwegian Cruise Line's free cash flow clocked in at $330.2 million in Q2, equivalent to a 13.9% margin. This quarter's cash profitability was in line with the comparable period last year and above its two-year average.
Key Takeaways from Norwegian Cruise Line's Q2 ResultsIt was great to see Norwegian Cruise Line's strong earnings forecast for the full year, which exceeded analysts' expectations. We were also excited its EPS outperformed Wall Street's estimates. Overall, we think this was a strong quarter that should satisfy shareholders. The stock traded up 1.5% to $18.85 immediately following the results.
