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Norwegian Cruise (NCLH) Down 45% YTD: Can the Stock Revive?

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Shares of Norwegian Cruise Line Holdings Ltd. NCLH have slumped 45.4% in the year-to-date period, compared with the industry’s decline of 39.7%. The decline was primarily due to the pandemic. Norwegian Cruise has been bearing the brunt of high expenses for quite some time now. During the first quarter of 2022, total cruise operating expenses soared 266.1% year over year to $735.4 million. However, improvement in bookings and fleet size expansions bode well. Let’s delve deeper and find out factors that are likely to drive the Zacks Rank #3 (Hold) stock performance.

Factors Likely to Drive Growth

On May 7, the company completed its phased fleet relaunch, and its entire 28-ship fleet is now operating. Norwegian Cruise was operating at nearly 85% of its capacity by the end of first-quarter 2022. In the quarter under review, occupancy was 48% due to the impact of the Omicron variant. The company anticipates its occupancy to achieve the pre-pandemic level across its fleet no later than the beginning of the third quarter of 2022. Most of the countries in the EU are now allowing travelers from the United States.

The coronavirus pandemic has severely affected the company’s booking. During December 2021 and early January 2022, the company witnessed a slowdown in booking activity, primarily due to the Omicron variant of COVID-19 and the Russia-Ukraine conflict. Due to this, the cumulative booked position for the second half of 2022 fell below 2019 levels. The bookings include the incorporation of higher pricing and the dilutive impact of future cruise credits (FCCs).

As of Mar 31, 2022, the company’s advance ticket sales (including the long-term portion) were $2.2 billion. The amount includes FCCs worth approximately $0.6 billion. With strong underlying demand, the company reported sequential improvements in net booking volumes and stated that bookings for fourth-quarter 2022 are in line with 2019 levels. NCLH stated that bookings for 2023 remained strong compared with 2020 and 2019 levels. Going forward, it intends to focus on strategic marketing efforts to drive demand and high-value bookings in the upcoming periods.

Norwegian Cruise is constantly looking to expand its fleet size, which is currently at 28. It has plans to introduce nine more ships through 2027. Most of them are on order for the Norwegian Cruise Line, while the rest are for Oceania Cruises and Regent Seven Seas Cruises. For the Regent brand, it has one Explorer Class Ship to be delivered in 2023. For the Oceania Cruises brand, the company has two Allura Class Ships to be delivered in 2023 and 2025. With the project Leonardo, Norwegian Cruise will have an additional six ships with expected delivery dates from 2022 through 2027. In 2023, NCLH anticipates the additions of Norwegian Viva, Oceania Cruises Vista and Regent Seven Seas Grandeur to its fleet.

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Key Picks

Some better-ranked stocks in the Zacks Consumer Discretionary sector are Bluegreen Vacations Holding Corporation BVH, MGM Resorts International MGM and Malibu Boats, Inc. MBUU.

Bluegreen Vacations sports a Zacks Rank #1 (Strong Buy). BVH has a trailing four-quarter earnings surprise of 85.9%, on average. The stock has increased 40.4% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for BVH’s current financial year sales and earnings per share (EPS) indicates growth of 11.2% and 35.1%, respectively, from the year-ago period’s reported levels.

MGM Resorts sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 212.5%, on average. Shares of the company have decreased 34% in the past year.  

The Zacks Consensus Estimate for MGM’s 2022 sales and EPS suggests growth of 28.1% and 240.3%, respectively, from the year-ago period’s levels.

Malibu Boats sports a Zacks Rank #1. MBUU has a trailing four-quarter earnings surprise of 16.1%, on average. Shares of the company have declined 25.5% in the past year.  

The Zacks Consensus Estimate for Malibu Boats’ current financial year sales and EPS suggests growth of 28.6% and 29.6%, respectively, from the year-ago period’s reported levels.


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