Company Reports

Thanks to travel demand that has more than recovered since the pandemic, Norwegian Cruise Line Holdings' economic performance should generate excess economic rents over the back half of our forecast. When consumers returned to cruising in 2021 after a 15-month sailing halt, they regained an appetite for travel, bolstered by the value proposition cruising provides. With ships fully deployed and occupied, pricing had risen to record levels in 2025. However, prices and occupancy are falling in 2026 due to executional missteps (misaligned deployment and marketing initiatives), an issue we believe will take at least a few quarters to remedy.

Norwegian reported a second-quarter yield decline of 2.1%, flat net cruise cost ex-fuel, and adjusted EPS of $0.48, $0.10 above its guidance. Still, the firm nudged its 2026 outlook to the low end of its prior forecast, calling for a yield decline of 4.7%, flat costs ex-fuel, and EPS of $1.50.

Thanks to travel demand that has more than recovered since the pandemic, Norwegian Cruise Line Holdings' economic performance should generate excess economic rents over the back half of our forecast. When consumers returned to cruising in 2021 after a 15-month sailing halt, they regained an appetite for travel, bolstered by the value proposition cruising provides. With ships fully deployed at optimal occupancy levels, pricing had risen to record levels in 2025. However, prices are falling in 2026 due to executional missteps (misaligned deployment and commercial initiatives), an issue we believe will take at least a few quarters to remedy.

Norwegian reported a first-quarter yield decline of 0.3% and a net cruise cost excluding fuel drop of 0.2%, driving adjusted EPS of $0.23. The 2026 outlook was cut to reflect a 2.7%-4.7% yield decline from a prior 1% decline, and $0.25 in pricier fuel, leading to EPS of $1.45-$1.79 ($2.38 prior).

Thanks to travel demand that has more than recovered since the pandemic, the economic performance of Norwegian Cruise Line Holdings is set to generate excess economic rents over most of our forecast. When consumers returned to cruising in 2021 after a 15-month sailing halt, they regained an appetite for travel, bolstered by the value proposition cruising provides. With ships fully deployed at optimal occupancy levels, pricing had risen to record levels in 2025. However, prices are nearly flat in 2026 as a result of executional missteps (misaligned deployment and commercial initiatives). Furthermore, Norwegian could see price competition in soft macroeconomic periods.

Norwegian's fourth quarter included growth of 4% in net revenue yield and 1% in net cruise cost excluding fuel, in line with its guidance for 3.8%-4.3% and 1.2%, respectively. A weak forecast for net yield growth of 0.4% in 2026 outweighed a positive outlook for well-managed cost growth of 1.4%.

Elliott Investment Management is pushing for change under its Norwegian Now turnaround initiative, to improve profitability, gain credibility, and extract shareholder value. Shares rallied 12% on the position announcement Feb. 17 in hopes of faster improvement in EBITDA ahead.

Norwegian appointed John W. Chidsey CEO, effective immediately. He brings a long track record in operational transformations, with deep experience in asset-intensive, yield-focused businesses, including stints at Subway (most recently).

As travel demand has more than recovered since the pandemic, the economic performance of Norwegian Cruise Line Holdings is set to generate excess economic rents over our forecast. When consumers returned to cruising in 2021 after a 15-month sailing halt, they regained an appetite for travel that has yet to relent, bolstered by the value proposition the holiday provides. With ships fully deployed at optimal occupancy levels, pricing has continued to rise after surpassing prepandemic levels in 2023, and is showing further growth in 2025. While Norwegian could intermittently see pricing competition in periods of macroeconomic distress, we believe its attractive itineraries, tactical revenue management (including its More at Sea bundle program), and data-driven marketing will keep elevating sales across the brands. On the cost side, while higher oil prices and unfavorable foreign exchange could raise costs at times, we expect management will focus on extracting further efficiencies as the business continues to scale. Over time, we expect both pricing and costs to normalize at low-single-digit rates.

Norwegian's third-quarter net revenue yield growth of 1.6% and adjusted net cruise cost excluding fuel uptick of 0.5% generated EPS of $1.20. Consumer appetite for travel remains strong, as evidenced by $3.1 billion in customer deposits, and third-quarter bookings climbed 20% from last year.

As travel demand has more than recovered since the pandemic, the economic performance of Norwegian Cruise Line Holdings is set to generate excess economic rents over our forecast. As consumers returned to cruising in 2021 after a 15-month sailing halt, they regained an appetite for travel that has yet to relent, bolstered by the value proposition the holiday provides. With ships fully deployed at optimal occupancy levels, pricing has continued to rise after surpassing prepandemic levels in 2023, and is showing further growth in 2025. While Norwegian could intermittently see pricing competition in periods of macroeconomic distress, we believe its attractive itineraries, tactical revenue management (including its More at Sea bundle program), and data-driven marketing will keep elevating sales across the brands. On the cost side, while higher oil prices and unfavorable foreign exchange could raise costs at times, we expect management will focus on extracting further efficiencies as the business continues to scale. Over time, we expect both pricing and costs to normalize at low-single-digit rates.

Second-quarter yield growth of 2.7% and net cruise cost excluding fuel growth of 0.2% led to adjusted EPS of $0.51 at Norwegian. A reiterated full-year outlook for 2.5% yield and 1.1% cost growth indicates demand and cost conditions remain undisturbed despite consumer uncertainty rhetoric.

Now that travel has recovered from the pandemic, economic performance of Norwegian Cruise Line Holdings is set to generate excess economic rents over our forecast. As consumers returned to cruising in 2021 after a 15-month sailing halt, they regained an appetite for travel that has yet to relent, bolstered by the value proposition the holiday provides. With ships fully deployed at optimal occupancy levels, pricing has continued to rise after surpassing prepandemic levels in 2023, and is showing further growth in 2025. While Norwegian could intermittently see pricing competition in periods of macroeconomic distress, we believe its attractive itineraries, tactical revenue management (including its More at Sea bundle program), and data-driven marketing will keep elevating sales across the brands. On the cost side, while higher oil prices and unfavorable foreign exchange could raise costs at times, we expect management will focus on extracting further efficiencies as the business continues to scale. Over time, we expect both pricing and costs to normalize at low-single-digit rates.

Sales of $2.1 billion supported by 0.6% as-reported yield growth and adjusted EPS of $0.07 were largely in line with Norwegian's guidance for the seasonally small first quarter. An operational EBITDA margin of 28.5% (flat) keeps the firm on track for a 37% rate for fiscal 2025 (up 150 basis points).

With pandemic-related changes in consumer behavior around travel well behind, economic performance of Norwegian Cruise Line Holdings is set to generate excess economic rents over our forecast. As consumers returned to cruising in 2021 after a 15-month sailing halt, they regained an appetite for travel that has yet to abate, bolstered by the value proposition the holiday provides. With ships fully deployed at optimal occupancy levels, pricing has continued to rise after surpassing prepandemic levels in 2023, and is showing further growth in 2025. While Norwegian could intermittently see pricing competition in periods of macroeconomic distress, we believe its attractive itineraries, tactical revenue management (including its More at Sea bundle program), and data-driven marketing will keep elevating sales across the brands. On the cost side, while higher oil prices and unfavorable foreign exchange could raise costs at times, we expect management will focus on extracting further efficiencies as the business continues to scale. Over time, we expect both pricing and costs to normalize at low-single-digit rates.

Norwegian's fourth quarter generated $2.1 billion in sales and $0.26 in adjusted EPS. With demand for travel persisting, the firm's initial 2025 outlook calls for a 2.4% yield increase and less than 1% cost increase excluding fuel, rendering adjusted EPS of $2.05, up 13% year over year.

With pandemic-related changes in consumer behavior around travel well behind, economic performance of Norwegian Cruise Line Holdings is on a path to the generation of excess economic rents. As consumers returned to cruising after the 15-month sailing halt that ended in July 2021, they regained their appetite for travel, bolstered by the value proposition the holiday provides, an interest that continues to persist. With ships fully deployed at historical occupancy levels, pricing surpassed prepandemic levels in 2023 and is showing momentum into 2025. While Norwegian could intermittently see pricing competition in periods of macroeconomic distress, we believe its attractive itineraries, tactical revenue management, and data-driven marketing will keep elevating sales across the brands. On the cost side, while higher oil prices and unfavorable foreign exchange could raise costs at times, we expect management will focus on extracting further efficiencies as the business continues to scale. Over time, we expect both pricing and costs to normalize at low-single-digit rates.

Narrow-moat Norwegian delivered robust third-quarter performance and a lifted full-year outlook, sending shares up around 10% on Oct. 31. The firm echoed similar rhetoric to narrow-moat peers Carnival and Royal Caribbean that consumer appetite for cruising has not abated. As evidence, Norwegian printed third-quarter-as-reported net revenue yield growth of 8.7%, 260 basis points ahead of our forecast, as pricing and onboard spend were better than expected. This led the firm to lift its 2024 yield outlook by 130 basis points, to 9.5%, indicating pricing momentum is set to continue into its final quarter, which should be up 7%. With pricing and load for 2025 in line or above 2024 levels for all four quarters, we think Norwegian should be well set to capture around 3% yield growth in 2025, which would generate net revenue yields above the $300 per day level, another high-water mark. If cruise operators continue to price rationally, we think this is a rate all three companies on our coverage list will trend to in 2025, with upside potential stemming from further outperformance of onboard demand.

With pandemic-related changes in consumer behavior around travel well behind, economic performance of Norwegian Cruise Line Holdings is on a path to the generation of excess economic rents. As consumers returned to cruising after the 15-month sailing halt that ended in July 2021, they regained their appetite for travel, bolstered by the value proposition the holiday provides, an interest that continues to persist. With ships fully deployed at historical occupancy levels, pricing surpassed prepandemic levels in 2023 and continues to show momentum in 2024. While Norwegian could intermittently see pricing competition in periods of macroeconomic distress, we believe its attractive itineraries, tactical revenue management, and data-driven marketing will keep elevating sales across the brands. On the cost side, while higher oil prices and unfavorable foreign exchange could raise costs at times, we expect management will focus on extracting further efficiencies as the business continues to scale. Over time, we expect both pricing and costs to normalize at low-single-digit rates.

Shares of narrow-moat Norwegian traded flat on its second-quarter results and updated outlook despite its cruises remaining a bright spot in the consumer landscape. Second-quarter metrics were slightly ahead of our outlook—revenue of $2.37 billion versus our $2.36 billion; adjusted EBITDA of $588 million against our $561 million; and adjusted EPS of $0.40 versus our $0.33 forecast. Most impressive was the outperformance of pricing, with as reported net yields up 6.3%, 200 basis points ahead of guidance and our forecast, as close-in demand and onboard revenue outperformed. Both Norwegian and narrow-moat Royal Caribbean have recently noted that they are taking more bookings for 2025 than 2024, boosting our confidence that demand momentum is set to keep up into 2025. Both solid pricing growth over the rest of 2024 (undisclosed) and higher prebooked onboard revenue (up 15%) have resulted in advance ticket sales of $3.9 billion, 11% higher than last year.