Norwegian Cruise Line Cuts Outlook On Brexit, Travel Anxieties

Norwegian Cruise Line (NCLH) on Tuesday slashed its earnings forecast for this year and said it would miss its profit target for next year, partly due to “continued weak demand” for European travel among core North American consumers and Brexit’s impact on the pound.

Shares plunged 11.8% to close at 37.91 in the stock market today, a day after the stock had begun to find support at its key 50-day line. Rival cruise line Royal Caribbean (RCL) sank 6.8%, and Carnival (CCL) was underwater by 3%.

Norwegian’s announcement comes amid more intense global anxiety, with some U.S. consumers thinking twice about traveling following ISIS-inspired violence worldwide over the past year, as well as heightened economic uncertainty and an often unpredictable, vitriolic election season.

The cruise service cut its 2016 earnings-per-share outlook to $3.35-$3.45 from an earlier projection of $3.65-$3.85. The new forecast was below analyst expectations for $3.72.

The company also cut its full-year forecast for adjusted net yield — an important metric that gauges sales compared to available ships and space on them — to around 1% growth. In May, the company had forecast an increase of around 3.5%.

“Overall, while investors have been bracing for an ugly guide, this was probably short of even lowered expectations, particularly on the yield front,” Wedbush analyst James Hardiman said in a research note.

IBD’S TAKE: Higher fuel costs, fare cuts and travelers’ uncertainty over their finances, health and safety could pose considerable headwinds to travel-related stocks. See how other travel names are doing at IBD’s Stock Checkup. 

The company’s third-quarter earnings guidance of $1.57-$1.62 a share was also well below views for $1.78.

The second quarter, however, wasn’t as bad, despite weak travel demand.

Earnings per share during the second quarter rose 13% to 85 cents, topping estimates by a penny. Revenue increased 9.3% to $1.186 billion, compared with Wall Street forecasts for $1.218 billion.

Norwegian said it has tried to keep fare discounting at a minimum, something with which the airline industry has also grappled.

“While successive geopolitical events dampened North American consumer demand primarily for our Mediterranean itineraries, our management team worked diligently to identify cost saving opportunities to partially mitigate these impacts and generate solid adjusted (earnings-per-share) growth of 13%,” Chief Executive Frank Del Rio said in a prepared statement.