Norwegian shares slide as world events hurt outlook
Shares of Norwegian Cruise Line Holdings fell Monday after the company said geopolitical events are hurting bookings.
The company said in its second-quarter earnings release that consumer demand for its Mediterranean itineraries were particularly hurt by less demand from customers from North America.
As a result of the weaker North American demand coupled with recent overseas turmoil, including a weaker British pound following the United Kingdom's vote in June to leave the European Union, the company no longer expects to reach its previously stated target of earnings of $5 per share, on an adjusted basis, for 2017.
"It was a challenging booking environment where we remained mindful of our go to market strategy to minimize discounting and maintain our hard-fought pricing gains," CEO Frank Del Rio said, "resulting in lower occupancy, which in turn lowered on-board revenue and overall net yield growth compared to our expectations earlier in the year.”
Although the company did not cite the wave of terrorism that has hit Europe as a direct cause in its release, Morningstar analyst Jaime Katz made the connection in a note to investors. Recent months have seen the Brussels airport attack, terrorism in Istanbul, the Bastille Day attacks, and an attempted military coup in Turkey.
"High income consumers in the U.S. (those that would be taking Oceania or Regent itineraries in the Mediterranean in particular) have been hesitant to move forward with planned trips abroad to the region," notes Katz. "And have been willing to forgo or postpone such holidays until they have more certainty about regional stability."
Similar concerns have plagued Norwegian's rivals. Shares of Royal Caribbean fell 6.8% Tuesday to $68.98 following Norwegian's lowered outlook.
While Europe remains a concern, "if this instability remains, we remind investors that Norwegian can continue to shift capacity out of the region, to where yields and demand is more attractive." The company currently has routes that go to Alaska, Bermuda and the Balkans that "remain solid" and has its first ship moving into China next year.
Katz adds that "the Asia-Pacific market could likely take on additional capacity from the Norwegian brand in 2018 and beyond."
Net income fell 8.3 percent in the second quarter to $145.2 million, or 64 cents per share. Excluding some items, the company said profit was 85 cents per share, beating Wall Street predictions of 83 cents.
Revenue came to $1.19 billion for the quarter, up 9.3% from $1.09 billion in 2015, but was still below Wall Street's expectations of $1.22 billion, according to analysts polled by S&P Global Capital Intelligence.
Norwegian shares fell 11.8% on Tuesday to close at $37.91. The stock has fallen more than 38% in the last 12 months.
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