Norwegian Cruise Lines Earnings: Exogenous Events Hit Near Term, but Forward Bookings Still Healthy

Given impacts from both wildfires in Hawaii and the Israel-Hamas war, certain pockets of sailings have hindered no-moat Norwegian’s near-term potential. While the wildfires in Maui are extinguished, allowing for the resumption of the Pride of Hawaii’s year-round interisland itineraries, the duration of Middle East geopolitical instability is unknown. This explicitly impacted fourth-quarter occupancy levels as cancellations have accelerated and a more hesitant cadence of bookings have ensued for the region. In our model, this trend will surface in our fourth-quarter forecast through lower occupancy (98% versus 102% prior) and lower as-reported net revenue yield growth due to weaker close in bookings (up 8% versus up 12% prior), which will result in around a $0.14 EPS loss, versus just above our breakeven forecast prior. Moreover, costs are likely to run higher than our initial 3% increase excluding fuel in 2024, with Norwegian undertaking 170 dry dock days, which will provide a 300-basis-point (or $4 on a unit cost basis) headwind.