There is a new publicly traded cruise ship operator in town and it should be on your radar. Norwegian Cruise Lines (NCLH) reported a stellar fourth quarter and full year earnings report. The earnings sent shares up, but there is more growth ahead for patient shareholders. Despite being on the market for a short time, Norwegian may be the better alternative to Carnival Corporation (CCL) and Royal Caribbean (RCL). This is a follow-up to my IPO preview of Norwegian.
Here is a look at the three companies:
|Market Capitalization||$29.1 billion||$7.8 billion||$5.8 billion|
|EPS Fiscal Year||$2.42||$2.52||$0.83|
|EPS Next Fiscal Year||$2.96||$3.06||$1.26|
|PE Ratio Fiscal Year||15.5||14.1||34.8|
|PE Ratio Next Year||12.7||11.6||23.0|
|Revenue Fiscal Year Growth||+5.9%||+5.2%||N/A|
|Revenue Next Year Growth||+5.3%||+4.3%||+13.5%|
|Cruise Market Share||48.4%||23.3%||7.6%|
(Price as of 02/13/13, eps estimates are from Yahoo Finance, cruise market share from Cruisemarketwatch.com)
Shares of Norwegian Cruise have seen analyst upgrades and a rise in share prices after good earnings. In the fourth quarter, revenue jumped to $503.2 million. Earnings per share were $0.04, which beat those predicted by analysts. Also during the fourth quarter, Norwegian saw its 18th consecutive quarter of year over year adjusted EBITDA growth.
In the fiscal year, net income was $173.1 million, representing earnings per share of $0.97. Revenue grew 2.6% to $2.28 billion. Revenue and earnings were higher from strong growth in passenger tickets and onboard revenue, despite higher fuel prices.
Norwegian Cruise Lines
Norwegian is the distant third in the cruise market. The company has a small margin over fourth place operator MSC Cruises. The company had its long awaited initial price offering in 2012. After listing a range of $16-$18, shares priced at $19. Shares are now up over 50% since their pricing.
Norwegian has only 11 ships in operation, but is about to grow its ship base and hopefully market share. This year, the company will welcome Norwegian Breakaway into its ship family. In 2014, the company will receive the Norwegian Getaway. The following year, Norwegian will get its Breakaway Plus, which will be its biggest ship in operation. The Breakaway and Getaway will both be the largest ships in their respective port cities of New York and Miami.
The case for Norwegian comes from its new ships and its stronger revenue growth. If you look at the chart above, you will see that next year's revenue is expected to grow 13.5%, compared to rivals 5.3% and 4.3%. Despite adding new ships, Carnival and Royal are maturing and offer income. Norwegian offers growth and has an opportunity to take market share away from the two larger ships. The Breakaway Plus will be the biggest ship and offer a huge boost in passengers served for Norwegian. Fiscal 2015 will see eve more aggressive growth targets from analysts and the company. This should bring price to earnings ratio back in line with rivals.
I highlighted Norwegian Cruise prior to its IPO. One of the biggest benefits I mentioned was the company's relative young fleet line. No ship was built prior to 1998 and Norwegian enjoys the shortest average age of its ships with 7.9 years.
Carnival Corporation and Royal Caribbean
Carnival is the largest player in the cruise industry, controlling almost 50% of the market. The company has 100 ships that served 208,710 passengers in 2012. Carnival was in the news recently with a fire on Carnival Triumph leaving passengers stranded in horrible conditions. I wrote about this recently and how it may impact earnings.
Royal Caribbean is the second largest ship operator, enjoying a 23.3% market share. Royal has 40 ships that are in operation. Royal has had a couple of strong quarters and appears to be taking share from Carnival. Royal may also benefit from the poor press being received by Carnival over the Triumph incident.
The cruise market grew by 4.5% in 2012 to $36.2 million. Over 20.9 million passengers took a cruise in 2012, representing 3.3% growth in customer base. In 2013, Cruisemarketwatch estimates that passengers will increase to 20.98 million. Here are their complete growth projections:
- 2013: 20.98 million passengers
- 2014: 21.62 million passengers
- 2015: 22.29 million passengers
- 2016: 22.98 million passengers
- 2017: 23.69 million passengers
Norwegian is guiding for 2013 earnings per share of $1.20 to $1.40. With analysts predicting $1.26, Norwegian will likely come in ahead of projections, which could see shares rise during each earnings report. If you are looking for growth opportunities in the steady rising cruise industry, look no further than Norwegian Cruise Lines.