Norwegian Cruise Line Holdings (NYSE:NCLH) reported record fourth-quarter revenue and earnings in the final three months of 2018 in its latest earnings report, released on Thursday. The company continues to glide through favorable waters in the cruise industry due to robust demand while capitalizing on new vessels in service. In the discussion that follows, note that all comparative numbers are presented against the prior-year quarter (the fourth quarter of 2017).
Norwegian Cruise Line: The raw numbers
|Metric||Q4 2018||Q4 2017||Growth (YOY)|
|Revenue||$1.38 billion||$1.25 billion||10.4%|
|Net income||$154.6 million||$98.8 million||56.4%|
|Diluted earnings per share||$0.70||$0.43||62.8%|
What happened this quarter?
- Management attributed the quarter's double-digit revenue increase to the addition of the 4,000-passenger-capacity Norwegian Bliss to the ship's fleet in April 2018. The company also cited organic ticket pricing growth in each of its core markets and "robust" onboard spending as factors behind the record $1.4 billion in revenue.
- Net yields (net revenue divided by total available passenger cruise days) increased at a healthy rate of 4.2%.
- Factoring in hedging activities, Norwegian's fuel cost per metric ton rose approximately 8% to $469.
- Operating margin increased by roughly 80 basis points to 59.2% as higher capacity utilization bumped up payroll, fuel usage, food, and other expenses. Marketing, general, and administrative expenses also edged up slightly against the prior-year period.
- Norwegian purchased approximately $201 million of its own shares on the open market during the quarter, bringing its total repurchases in 2018 to $664.8 million, against zero repurchases in 2017.
- The company confirmed that the Norwegian Joy will join the Norwegian Bliss in Alaskan waters in the spring of 2019.
- The cruise line also confirmed that the Norwegian Encore, currently under construction, will join the fleet in the fourth quarter and will ply the Caribbean from its base in Miami.
What management had to say
Norwegian has enjoyed momentum from favorable conditions in the cruise industry and its recent launch of the Bliss. In the company's earnings press release, CEO Frank Del Rio both lauded recent results and projected a high degree of confidence in the coming year:
The team at Norwegian Cruise Line Holdings delivered a breakout year in 2018, once again generating industry-leading record financial performance. Strong global demand for our portfolio of brands, the successful, record-breaking introduction of Norwegian Bliss and the flawless execution of our demand creation strategies drove our fifth consecutive year of double-digit earnings-per-share growth. Building on this momentum, we entered 2019 in the best booked position in our Company's history, with pricing above prior year's record levels. The strong start to this year's WAVE [early booking] season, coupled with our moderate in-year capacity growth and our solid booked position across our three brands, has us well-positioned to continue driving price throughout the year and into 2020, where we will also benefit from the first full year of sailings from Norwegian Encore and the addition of Regent's Seven Seas Splendor.
Norwegian provided its outlook for both first quarter and full year 2019 alongside earnings. The company projects that net yields will grow approximately 2% in the first quarter and increase between 2.5% and 3.5% for the full year.
First-quarter 2019 adjusted earnings per share (EPS) are targeted at $0.70, against $0.60 in the first quarter of 2018. Management pegs full-year EPS within a range of $5.20 to $5.30, which at the midpoint will equal an improvement of 7% over the $4.92 in adjusted EPS recorded by Norwegian in 2018.
Norwegian Cruise Line's earnings projections anticipate solid growth. However, the company's favorable booking position at the outset of 2019, coupled with recent onboard spending trends and the success of the Norwegian Bliss, may imply that higher earnings expansion is possible this year. Thus, shareholders shouldn't be completely surprised if management favorably revises full-year estimates at least once in the coming quarters.