Here's What to Expect From Norwegian Cruise's Q2 Earnings

Norwegian Cruise Line Holdings Ltd. NCLH is slated to report second-quarter 2024 results on Jul 31, before the opening bell.

In the last quarter, the company's earnings topped the Zacks Consensus Estimate by 33.3%, while revenues missed the same by 2%.

NCLH's earnings beat the consensus mark in three of the trailing four quarters and missed on the remaining occasion, the average surprise being 4%.

Trend in Estimate Revision

The Zacks Consensus Estimate for adjusted earnings per share has been unchanged at 34 cents over the past 60 days. The estimated figure indicates year-over-year growth of 13.3% from the reported adjusted EPS of 30 cents.

Factors at Play

Revenues
The top line of Norwegian Cruise is expected to gain year over year due to the solid demand trends across its diversified array of fleet and associated product offerings. This demand uptrend is likely to have resulted in increased bookings, occupancy rates, and advance ticket sales, thus aiding revenue growth. Furthermore, the company's comprehensive new build program at eight of its state-of-the-art vessels, along with the construction of a multi-ship pier at Great Stirrup Cay, is likely to have aided the uptick.

Alongside the aforementioned tailwinds, its fleet expansion initiatives, focus on innovation, and digital investments are likely to have been added benefits, which are expected to have fostered the growth trends.

NCLH expects occupancy to be approximately 105.7%, up from the year-ago quarter's reported value of about 105%. Capacity days are expected to be about $5.74 million, up from $5.51 million reported a year ago.

Our model predicts passenger ticket, and onboard and other revenues to increase on a year-over-year basis by 5.5% and 10% to $1.56 billion and $799.8 million, respectively.
Earnings & Margins
The bottom line is expected to increase year over year on the back of Norwegian Cruise's continuous focus on cost reductions and efficiencies, accompanied by margin enhancement initiatives. Also, leverage from top-line growth is expected to have been an added benefit. Although the uncertain economic environment and inflation risks are concerning, the aforementioned positive traits are likely to have more than offset these headwinds in the quarter.

The company anticipates net yields to rise approximately 4.3% on reported as well as constant currency basis. Adjusted EBITDA is expected to be about $555 million, up year over year from $515 million. Moreover, the company expects adjusted EPS of approximately 32 cents.

Our model expects total cruise operating costs to rise 7.1% year over year to $1.48 billion. Adjusted EBITDA is expected to increase 8.1% year over year to $556.3 million.

What Our Model Unveils

Our proven model does not conclusively predict an earnings beat for Norwegian Cruise this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that is not the case here.

Earnings ESP: NCLH has an Earnings ESP of -0.83%.

Zacks Rank: The company has a Zacks Rank of 3 at present.

Stocks With Favorable Combination

Here are some stocks from the Zacks Consumer Discretionary space, which according to our model, have the right combination of elements to deliver an earnings beat this time around.

Hyatt Hotels Corporation H currently has an Earnings ESP of +48.96% and a Zacks Rank of 3.

H's earnings topped the Zacks Consensus Estimate in two of the last four quarters and missed on the remaining two occasions, the average surprise being 20.3%. Earnings for the second quarter of 2024 are expected to increase 57.3% year over year.

Hilton Grand Vacations HGV presently has an Earnings ESP of +16.12% and sports a Zacks Rank of 1.

HGV's earnings for the second quarter are expected to increase 4.7%. The company reported better-than-expected earnings in each of the trailing four quarters, the average surprise being 7.2%.

MGM Resorts International MGM currently has an Earnings ESP of +15.35% and a Zacks Rank of 3.

MGM's earnings for the second quarter are expected to increase 11.9%. The company reported better-than-expected earnings in each of the last four quarters, the average surprise being 27.3%.

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