What happened

Shares of Norwegian Cruise Line Holdings (NCLH -2.51%) were down 14% as of 11:28 a.m. ET on Tuesday after the company released its second-quarter earnings report.

The cruise ship operator is seeing healthy demand but is still in the process of cutting costs. As a result, management issued earnings guidance for next quarter that came in below the Street's consensus expectation, sending the stock down.

So what

Q2 revenue was a record $2.2 billion, up 33% compared to the same period in 2019. This comes on top of strong demand at other leading cruise lines. It's good to see these companies still enjoying a robust recovery from the pandemic.

But with the stock up over 60% this year going into the earnings report, investors were already expecting strong results. Management raised its full-year outlook on the back of strong demand, but investors were expecting more on the bottom line.

For the third quarter, management projects adjusted earnings per share to come in at approximately $0.70, while Wall Street analysts were anticipating $0.79.   

Now what

From the a long-term perspective, the earnings guidance is not a big deal. Management is still in the process of rightsizing costs, which could lead to further margin improvement and a boost to earnings beyond next quarter.

Also, it is evident that demand for travel is very strong right now. The revenue growth comes on top of a meaningful increase in prices, yet occupancy grew sequentially over the previous quarter to 105%. 

Investors shouldn't expect the shares to continue rising as sharply as they did in the first half of 2023. On a forward price-to-earnings basis, the stock is not as cheap as it was at the beginning of the year. It might be reaching fair value territory at a forward P/E of 23.