Why 3 Major Cruise Stocks Dropped Today

what happened

First Carnival (CCL -5.39%) (DICK -6.03%) reported its losses in the second quarter and forecast more in the third quarter.

Then it came Royal Caribbean (RCL -5.62%)which did exactly the same thing.

Today, the collegiate cruise line company Norwegian Cruise Line Holdings (NCLH -10.57%) reported a loss of $1.14 per share last quarter — and will continue to lose money through at least the third quarter. But despite the entirely expected news, Norwegian Cruise stock is down 11.8% as of 3:30pm ET today, while Carnival is down 6.4%, and Royal Caribbean is down 6.3%.

And what

Granted, the Norwegian Cruise news was one slightly worse than expected. Sales of just under $1.2 billion missed expectations for sales closer to $1.3 billion. Norway’s loss, too, was bigger than Wall Street had expected – $1.14 per share, pro forma, where analysts had expected $0.86.

But even so, from a grand perspective, Norway’s news was right in line with what its peers have been reporting over the past six or so weeks. On the one hand, Norwegian insisted it is seeing “continued strong consumer demand” and “acceleration in booking volumes, particularly for 2023” and is able to set “record prices” for cruises as a result. On the other hand, the overall occupancy of Norwegian cruise ships was only 65% ​​in the second quarter, possibly rising to the low 80% mark next quarter, and is not expected to return to historical occupancy levels for another year.

Meanwhile, Norway’s input costs, including fuel (up 24% per ton year-on-year), payroll and other costs that are rising due to inflation, are eating into the company’s “record price” profits. So while Norwegian’s losses fell 37% year over year, the company still ended up losing money for the quarter — $1.22 per share, according to generally accepted accounting principles (GAAP).

Now what

So what is the upshot of all of the above? The earnings news is still good. Norwegian says revenue could rise 25% or more sequentially in the third quarter, to $1.5 billion or even $1.6 billion. But even so, between the rising cost of fuel and other inflationary input costs, and the rising cost of servicing the company’s debt (due to rising interest rates), Norway says it will lose money again in the quarter third — as Royal Caribbean said it would happen last week, and as Carnival Corporation said it would happen in June.

Norway has not he said when he expects to turn profitable again. (For that matter, neither Carnival nor Royal Caribbean.) And analysts have yet to update their forecasts since they made the (wrong) prediction that Norwegian Cruise WILL to be profitable in the third quarter. For what it’s worth, though, analysts who follow Carnival, which was the first cruise line to report earnings this earnings season and has given Wall Street more time to digest its numbers, caution that Carnival may not will win again before. Q2 2023.

I think it’s safe to assume that Norway (and Royal Caribbean) probably won’t either.