Norwegian cruise line holdings (NYSE:NCLH) quarterly results for period ending September 2018
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Category: Financial markets
Date: 8 November 2018 Share price at time of writing: $48.10 |
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We take a look at the quarterly results of Norwegian cruise line holdings listed on the New York Stock Exchange (NYSE) for the period ending September 2018. Has higher crude oil prices started to affect their bottom line as they use a lot of fuel in operating their cruise liners?
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About Norwegian Cruise Line Holdings
While their name pretty much sums up their business and what they do, below a few more details regarding the company. The group owns Norwegian Cruise Line, Oceania cruises and Regent Seven Seas cruises brands. The group owns and operates a fleet of 25 ships, with approximately 50 400 berths and offer itineraries to more than 450 destinations world wide. The company has been in the cruise line business for the last 51 years.
Norwegian Cruise Line is a cruise line founded in 1966 and based in the United States. It is the third-largest cruise line in the world, controlling approximately 8.7% of the total worldwide share of the cruise market by passengers as of 2018 (according to Wikipedia)
So to the numbers we go
Below the highlights of the quarterly results as published by Norwegian Cruise Line Holdings in their quarterly report
- The Company generated GAAP net income of $470.4 million compared to $400.7 million in the prior year
- Earnings per share (EPS) of $2.11 compared to $1.74 in the prior year. Placing them on a forward PE ratio of 10.1, which is not terribly expensive.
- Total revenue increased 12.5% to $1.9 billion. (for the quarter), putting revenue for the first 9 months of the financial year at $4.7billion
- Net profit margin during the quarter: 24.7% (up from 24.2% in the prior year)
- The Company expects to generate record earnings in full year 2018 and has increased its outlook above the high-end of its previous guidance range. Adjusted EPS is now expected to be approximately $4.85, which is inclusive of the previously announced impact from itinerary optimization initiatives which will benefit future periods.
So any comments or guidance from management on the results?
The following extracts were taken from their quarterly results as published on 8 November 2018
“Our three brands fully benefited from strong demand for peak summer season sailings, with particular strength in premium-priced itineraries in Alaska and Europe, resulting in the highest quarterly revenue and earnings in our history,” said Mark A. Kempa, executive vice president and chief financial officer. “As 2018 winds down, our earnings outlook improves as we increase our full year Adjusted EPS above the high-end of our previous guidance range.”
“Our three brands fully benefited from strong demand for peak summer season sailings, with particular strength in premium-priced itineraries in Alaska and Europe, resulting in the highest quarterly revenue and earnings in our history,” said Mark A. Kempa, executive vice president and chief financial officer. “As 2018 winds down, our earnings outlook improves as we increase our full year Adjusted EPS above the high-end of our previous guidance range.”
“The robust booking environment for cruise vacations is alive and well as evidenced by our stellar booked position for 2019, which continues to exceed this year’s record levels, with booking momentum accelerating for sailings throughout 2019 and extending into 2020,” said Frank Del Rio, president and chief executive officer of Norwegian Cruise Line Holdings Ltd. “We are well-positioned to achieve the three-year double-digit Adjusted EPS CAGR, net leverage and Adjusted ROIC targets provided at our 2018 Investor Day, while at the same time returning meaningful capital to shareholders, despite rising fuel prices and fluctuations in foreign exchange rates.”
What we found interesting is the amount of fuel used during the quarter and the cost of fuel as one of their main expense ticket items. According to the quarterly results update the group spent $99.6 million during the quarter on fuel, up from $91.2 million in the prior year. Thus fuel spend increased by 9.2%.
During the 3rd quarter the group used 215 000 metric tons worth of fuel (at a cost of $99.6 million) at a cost of $463 a metric ton, and for the full year they are forecasting total fuel used at 817 000 metric tons worth of fuel, at an average price of $480 a metric ton. So the average expected price per metric ton of fuel for the full year is well above the average price paid per metric ton in the 3rd quarter. A clear indication increased crude prices is starting to filter through to their operating expenses? Will it hurt their margins? Perhaps, but only time will tell if they can pass on increased fuel prices onto their passengers.
What we found interesting is the amount of fuel used during the quarter and the cost of fuel as one of their main expense ticket items. According to the quarterly results update the group spent $99.6 million during the quarter on fuel, up from $91.2 million in the prior year. Thus fuel spend increased by 9.2%.
During the 3rd quarter the group used 215 000 metric tons worth of fuel (at a cost of $99.6 million) at a cost of $463 a metric ton, and for the full year they are forecasting total fuel used at 817 000 metric tons worth of fuel, at an average price of $480 a metric ton. So the average expected price per metric ton of fuel for the full year is well above the average price paid per metric ton in the 3rd quarter. A clear indication increased crude prices is starting to filter through to their operating expenses? Will it hurt their margins? Perhaps, but only time will tell if they can pass on increased fuel prices onto their passengers.
So should you buy their shares?
We like the stock and rate them as a buy. Strong earnings, strong demand for their products. Their number of passengers shipped and transported increased by 11% from the prior year, with the 3rd quarter numbers sitting at 823 413 up from 741 216 the prior year. A clear indication that demand is strong and growing. Tourism as a world wide industry continues to show strong growth. The group also has strong cash generation capacity. Cash generated per share sitting at $4.84 a share predicted for the full year.
Valuation of Norwegian Cruise Line Holdings (NCLH)
Based on our valuation models we value the group at $54.87 a share which will put them on a mild PE ratio of around 12.2 which is not very demanding. With strong demand, strong potential future earnings, we believe its a stock well worth holding.
Disclaimer: Investors are encouraged to do their own research and we cannot be held accountable for an losses incurred by any investor in the company
Disclaimer: Investors are encouraged to do their own research and we cannot be held accountable for an losses incurred by any investor in the company