This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Norwegian Cruise Line CEO Outlines Earnings Beat Strategy

NEW YORK (TheStreet) -- Norwegian Cruise Line's (NCLH - Get Report) second quarter demonstrated that the company's investments in new ships and fleet modernization are paying dividends.

Adjusted earnings per share came in at 58 cents, a penny above Wall Street expectations.  The result represented the seventh consecutive quarter in which Norwegian Cruise Line surpassed consensus earnings expectations, based on data compiled by Bloomberg

Net revenue growth clocked in at 18.9% year over year, below consensus estimates for 23.7% growth, marking the fifth straight quarter that Norwegian Cruise Line was light in terms of revenue.  The revenue shortfall could be attributed to what chief executive officer Kevin Sheehan characterized a "promotional environment," likely in the Caribbean market, which led to on-board revenue growth outpacing ticket growth.

In the second quarter, ticket revenue rose 17.59% year over year, compared to on-board revenue that gained a more impressive 22%.

Watch More: Video Interview Exclusive: Domino's Pizza CEO Says Big Ideas are in the Oven

In an interview aboard the Norwegian Breakaway earlier this month, Sheehan shared what precisely the company is doing to deliver the aforementioned improved results to shareholders. The investments involve upgrading dining amenities, focusing on premium lodging experiences on the ship, and reducing fuel consumption through hull redesigns and other measures.  For example, in the second quarter, Norwegian's fuel consumption per capacity day declined 5.1%.

"I think what you find is that people, they see the brands they know, and then are more comfortable, then they engage, and hopefully while they are having a good time, spend a little more," Sheehan said. The CEO said Norwegian has been bringing land-based experiences that customers easily identify with on board its ships.

From a lodging perspective, Norwegian's super premium option "The Haven," offers vacationers to what amounts to a private island on a floating vessel. "There is a separate pool, concierge, butler, gym facilities, spa facilities, you're treated like a superstar, even though in everyday life some of us aren't superstars," Sheehan said when asked to describe the experience in this secluded portion of the ship.

Where these investments are appearing most acutely are in the revenue and profitability measures of the company. Revenue growth for Norwegian Cruise Line has ranged from 19.3% in the fourth quarter of 2013 to 18.9% in the second quarter of 2014, more than four times that of larger rivals (based on market cap) Carnival Corp. (CCL - Get Report) and Royal Caribbean (RCL - Get Report).

Further, Norwegian Cruise Line has the highest return on equity amongst its competitors according to Bloomberg data at 9.96%, versus 4.58% for Carnival Corp. and 6.24% at Royal Caribbean.

Watch More: Video Interview Exclusive: The State of the Cruise Industry, as Seen by Norwegian's CEO

Four new ships are set to arrive in the fourth quarter of 2015, first quarter of 2017, the second quarter of 2018, and the fourth quarter of 2019 for Norwegian Cruise Line, enhancing the company's position as operating the youngest fleet of cruise vessels in the industry.

Considering this, and the upgraded experiences likely on each of those new ships that will support solid revenue and earnings growth, Norwegian Cruise Line shares, valued at 12.3x estimated forward earnings, a discount to Carnival Corp. at 15.07x and Royal Caribbean at 14.4x, look attractive.

At the time of publication, the author had no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
NCLH $57.12 -1.10%
CCL $49.28 -0.44%
RCL $87.80 -1.20%
AAPL $112.96 -0.29%
FB $89.30 -1.90%

Markets

Chart of I:DJI
DOW 16,523.54 -119.47 -0.72%
S&P 500 1,971.53 -17.34 -0.87%
NASDAQ 4,780.3160 -48.0090 -0.99%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs