Stock Story -
Cruise company Norwegian Cruise Line (NYSE:NCLH) beat Wall Street’s revenue expectations in Q3 CY2024, with sales up 10.7% year on year to $2.81 billion. Its non-GAAP profit of $0.99 per share was also 5.3% above analysts’ consensus estimates.
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Norwegian Cruise Line (NCLH) Q3 CY2024 Highlights:
- Revenue: $2.81 billion vs analyst estimates of $2.77 billion (1.4% beat)
- Adjusted EPS: $0.99 vs analyst estimates of $0.94 (5.3% beat)
- EBITDA: $931 million vs analyst estimates of $879.8 million (5.8% beat)
- Management raised its full-year Adjusted EPS guidance to $1.65 at the midpoint, a 7.8% increase
- EBITDA guidance for the full year is $2.43 billion at the midpoint, above analyst estimates of $2.38 billion
- Gross Margin (GAAP): 45.2%, up from 41.5% in the same quarter last year
- Operating Margin: 24.6%, up from 20.6% in the same quarter last year
- EBITDA Margin: 33.2%, up from 29.7% in the same quarter last year
- Free Cash Flow was -$195.5 million compared to -$918.4 million in the same quarter last year
- Passenger Cruise Days: 6.52 million at quarter end
- Market Capitalization: $10.48 billion
Company OverviewWith amenities like a full go-kart race track built into its ships, Norwegian Cruise Line (NYSE:NCLH) is a premier global cruise company.
Travel and Vacation Providers
Airlines, hotels, 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 airlines, hotel, resorts, and cruise line companies must innovate to stay relevant in a market rife with innovation.Sales Growth
A 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. Regrettably, Norwegian Cruise Line’s sales grew at a sluggish 8% compounded annual growth rate over the last five years. This shows it failed to expand in any major way, 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 56.7% 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 reported year-on-year revenue growth of 10.7%, and its $2.81 billion of revenue exceeded Wall Street’s estimates by 1.4%.
Looking ahead, sell-side analysts expect revenue to grow 5.9% over the next 12 months, a deceleration versus the last two years. This projection doesn't excite us and shows the market believes its products and services will see some demand headwinds.
Cash Is King
If 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.Norwegian Cruise Line broke even from a free cash flow perspective over the last two years, giving the company limited opportunities to return capital to shareholders.
Norwegian Cruise Line burned through $195.5 million of cash in Q3, equivalent to a negative 7% margin. The company’s cash burn slowed from $918.4 million of lost cash in the same quarter last year.