Norwegian Earnings: Appetite for Travel Lends to Rising Pricing but Cost Improvement Taking Time

We plan to lower our $27 fair value estimate for no-moat Norwegian by a low-single-digit rate after adding its modest second-quarter outperformance and updated EPS outlook into our model. In the second quarter, as-reported net yield growth of 2.4% (versus 2019’s level) was 30 basis points below our forecast, while net cruise costs excluding fuel per diem were $156, $3 ahead of guidance and our estimate. This led to quarterly adjusted EPS of $0.30, $0.05 ahead of prior guidance, which was the raise in the firm’s full year EPS outlook—to $0.80, from $0.75. Full-year demand commentary did not disappoint; the advance ticket sales balance rose to $3.5 billion, an all-time high and $167 million higher than last quarter, and the second half of 2023 is booked ahead of 2019’s level at higher prices.