Cruise company Norwegian Cruise Line (NYSE:NCLH) beat Wall Street’s revenue expectations in Q3 CY2024, with sales up 10.7% year on year to $2.81 billion. Its non-GAAP profit of $0.99 per share was also 5.3% above analysts’ consensus estimates.
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Norwegian Cruise Line (NCLH) Q3 CY2024 Highlights:
- Revenue: $2.81 billion vs analyst estimates of $2.77 billion (1.4% beat)
- Adjusted EPS: $0.99 vs analyst estimates of $0.94 (5.3% beat)
- EBITDA: $931 million vs analyst estimates of $879.8 million (5.8% beat)
- Management raised its full-year Adjusted EPS guidance to $1.65 at the midpoint, a 7.8% increase
- EBITDA guidance for the full year is $2.43 billion at the midpoint, above analyst estimates of $2.38 billion
- Gross Margin (GAAP): 45.2%, up from 41.5% in the same quarter last year
- Operating Margin: 24.6%, up from 20.6% in the same quarter last year
- EBITDA Margin: 33.2%, up from 29.7% in the same quarter last year
- Free Cash Flow was -$195.5 million compared to -$918.4 million in the same quarter last year
- Passenger Cruise Days: 6.52 million at quarter end
- Market Capitalization: $10.48 billion
"Our exceptional third quarter results, with record revenue, net income and Adjusted EBITDA, surpassed guidance across all key metrics, underscoring the strength of our business, the attractiveness of our product offering across all brands and the superior execution and delivery by our teams both shoreside and shipboard," said Harry Sommer, President and chief executive officer of Norwegian Cruise Line Holdings Ltd. "Fueled by robust demand and our relentless focus on cost control and margin enhancement, we're raising our full-year guidance for a fourth time and expect 2024 to be our best year2 for revenue, Net Yield growth and Adjusted EBITDA.
Company Overview
With amenities like a full go-kart race track built into its ships, Norwegian Cruise Line (NYSE:NCLH) is a premier global cruise company.
Travel and Vacation Providers
Airlines, hotels, resorts, and cruise line companies often sell experiences rather than tangible products, and in the last decade-plus, consumers have slowly shifted from buying "things" (wasteful) to buying "experiences" (memorable). In addition, the internet has introduced new ways of approaching leisure and lodging such as booking homes and longer-term accommodations. Traditional airlines, hotel, resorts, and cruise line companies must innovate to stay relevant in a market rife with innovation.
Sales Growth
A company’s long-term performance is an indicator of its overall business quality. While any business can experience short-term success, top-performing ones enjoy sustained growth for multiple years. Regrettably, Norwegian Cruise Line’s sales grew at a sluggish 8% compounded annual growth rate over the last five years. This shows it failed to expand in any major way, a rough starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new property or emerging trend. Norwegian Cruise Line’s annualized revenue growth of 56.7% over the last two years is above its five-year trend, suggesting its demand recently accelerated. Note that COVID hurt Norwegian Cruise Line’s business in 2020 and part of 2021, and it bounced back in a big way thereafter. 
This quarter, Norwegian Cruise Line reported year-on-year revenue growth of 10.7%, and its $2.81 billion of revenue exceeded Wall Street’s estimates by 1.4%.
Looking ahead, sell-side analysts expect revenue to grow 5.9% over the next 12 months, a deceleration versus the last two years. This projection doesn't excite us and shows the market believes its products and services will see some demand headwinds.
Here at StockStory, we certainly understand the potential of thematic investing. Diverse winners from Microsoft (MSFT) to Alphabet (GOOG), Coca-Cola (KO) to Monster Beverage (MNST) could all have been identified as promising growth stories with a megatrend driving the growth. So, in that spirit, we’ve identified a relatively under-the-radar profitable growth stock benefitting from the rise of AI, available to you FREE via this link.
Cash Is King
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
Norwegian Cruise Line broke even from a free cash flow perspective over the last two years, giving the company limited opportunities to return capital to shareholders.
Norwegian Cruise Line burned through $195.5 million of cash in Q3, equivalent to a negative 7% margin. The company’s cash burn slowed from $918.4 million of lost cash in the same quarter last year.
Key Takeaways from Norwegian Cruise Line’s Q3 Results
We enjoyed seeing Norwegian Cruise Line beat analysts’ EBITDA guidance expectations for next quarter. We were also glad its EBITDA outperformed Wall Street’s estimates. Overall, this quarter had some key positives. The stock traded up 1.7% to $24.26 immediately following the results.
Indeed, Norwegian Cruise Line had a rock-solid quarterly earnings result, but is this stock a good investment here? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.
