What happened
First Carnival (CCL 1.49%) (CUK 1.34%) reported its second-quarter losses and predicted more in the third quarter.
Then came Royal Caribbean (RCL 0.04%), which did the exact same thing.
Today, peer cruise line company Norwegian Cruise Line Holdings (NCLH -0.77%) reported it lost $1.14 per share last quarter -- and will keep losing money at least through Q3. But despite the entirely expectable news, Norwegian Cruise stock is down 11.8% as of 3:30 p.m. ET today, while Carnival is off 6.4%, and Royal Caribbean is sinking 6.3%.
So what
Granted, Norwegian Cruise's news was a bit worse than anticipated. Sales of just under $1.2 billion missed expectations for sales of closer to $1.3 billion. Norwegian's loss, too, was larger than Wall Street had forecast -- $1.14 per share, pro forma, where analysts had predicted $0.86.
But even so, from a big-picture perspective, Norwegian's news was right in line with what its peers have been reporting over the past six or so weeks. On the one hand, Norwegian insisted it is seeing "continued strong consumer demand," and "accelerating booking volumes, especially for 2023," and is able to charge "record pricing" for cruises as a result. On the other hand, overall occupancy of Norwegian cruise ships was only 65% in Q2, rising to perhaps the low 80% range next quarter, and not expected to return to historical levels of occupancy for another year.
Meanwhile, Norwegian's input costs, including fuel (up 24% per ton year over year), payroll, and other costs that are rising due to inflation, are eating up all the revenue gains from the company's "record pricing." So while Norwegian's losses declined by 37% year over year, the company still ended up losing money for the quarter -- $1.22 per share, under generally accepted accounting principles (GAAP).
Now what
So what's the upshot from all of the above? The revenue news is still good. Norwegian says revenue could climb 25% or more sequentially in Q3, to $1.5 billion or even $1.6 billion. But even so, between the rising cost of fuel and other inflationary input costs, and the rising cost of servicing the company's debt (because of rising interest rates), Norwegian says it will lose money again in Q3 -- just like Royal Caribbean said it would last week, and just like Carnival Corporation said it would in June.
Norwegian has not said when it expects to turn profitable again. (For that matter, neither have Carnival or Royal Caribbean.) And analysts haven't yet updated their forecasts since making the (wrong) prediction that Norwegian Cruise would be profitable in Q3. For what it's worth, though, analysts who follow Carnival, which was the first cruise company to report earnings this earnings season, and has given Wall Street the most time to digest its numbers, warn that Carnival probably won't earn a profit again before Q2 2023.
I think it's safe to assume that Norwegian (and Royal Caribbean) probably won't either.
