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Norwegian Cruise forecasts upbeat Q1 profit on record demand

FILE PHOTO: Cruise ships Norwegian Dawn and Grandeur of the Seas are seen in port near Hamilton Bermuda

By Doyinsola Oladipo and Ananya Mariam Rajesh

(Reuters) - Norwegian Cruise Line Holdings forecast a first-quarter profit above Wall Street estimates on Tuesday, as it controls costs and benefits from higher ticket prices and steady demand for cruises globally, sending the company's shares up 18%.

Cruise operators are experiencing record levels of bookings in 2024 as travelers look to spend on novel experiences and are choosing cruises to the Caribbean and Europe over land-based vacations, giving the companies more room to hike itinerary prices.

Norwegian Cruise's advance ticket sales ended 2023 at a year-end record of $3.2 billion, about 56% higher compared with the end of 2019.

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"The demand for cruise vacations is certainly as robust as we have ever seen," CEO Harry Sommer said on an earnings call.

The company forecast an adjusted profit of 12 cents per share for the first quarter, compared with LSEG estimates of a loss of 20 cents per share.

The most important aspect of the earnings release is the "massively ahead" of consensus first-quarter target, said Patrick Scholes, Truist Equity Analyst in a note.

Norwegian's fourth-quarter revenue rose about 31% to $1.99 billion, topping expectations of $1.97 billion. The company posted an adjusted loss per share of 18 cents compared with estimates of a 14 cent loss.

Occupancy levels rose to 99.2% from 87% a year earlier.

"The top line wasn't really an area of focus for most people," said Ken Kuhrt, Ariel Investments Portfolio Manager. "It was the cost side of the equation and they came out with numbers that look fantastic."

Cruise-related costs in 2023, excluding fuel, were 21% lower from a year earlier, Norwegian Cruise CFO Mark Kempa said. The company expects 2024 adjusted net cruise costs, excluding fuel and repair costs, to be flat year-over-year.

Norwegian Cruise's fiscal 2024 adjusted profit forecast of $1.23 was in line with estimates.

(Reporting Doyinsola Oladipo in New York and Ananya Mariam Rajesh in Bengaluru; Additional Reporting by Granth Vanaik; Editing by Shounak Dasgupta and Shinjini Ganguli)