Stock Story -
What Happened: Shares of cruise company Norwegian Cruise Line (NYSE:NCLH) jumped 8.2% in the morning session after the company reported new financial targets ahead of its 2024 Investors Day session. In line with its "Charting the Course" strategy, NCLH raised FY'2024 guidance: Net Yield (Adjusted Gross Margin per Capacity Day) growth expectation was raised from 6.4% to 7.2%, Adjusted EBITDA guidance was raised from $2.25 billion to $2.30 billion, and Adjusted EPS outlook was raised from $1.32 to $1.42.
In the longer term, the company expects the new strategy to drive 1.) FY'2026 adjusted Operational EBITDA margin of approximately 39% 2.) adjusted EPS of approximately $2.45 (representing a 2-year CAGR from 2024 to 2026 of over 30%). 3.) Record Adjusted ROIC of 12%, exceeding pre-2020 levels.
Overall, the guidance seemed promising and provided ample reasons for investors to stay positive.
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What is the market telling us: Norwegian Cruise Line's shares are very volatile and over the last year have had 27 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 19 days ago, when the stock dropped 13.9% on the news that the company reported first-quarter results, with revenue falling below Wall Street's expectations. However, adjusted EBITDA and EPS came in ahead of consensus. That was driven by higher efficiency and leverage on fixed costs.
Occupancy during the quarter clocked in at 104.6%, and the company noted it received an "unprecedented level of advance ticket sales". These strong numbers likely contributed to its recent decision to build eight new vessels.
Looking ahead, the company raised its full-year earnings guidance, slightly exceeding Wall Street's estimates.
Zooming out, we think this was a mixed but weaker quarter for the company.
Norwegian Cruise Line is down 7.3% since the beginning of the year, and at $16.97 per share it is trading 24.6% below its 52-week high of $22.52 from July 2023. Investors who bought $1,000 worth of Norwegian Cruise Line's shares 5 years ago would now be looking at an investment worth $303.80.
