Shares of Norwegian Cruise Line Holdings (NCLH) pulled back after the cruise operator reported third-quarter earnings. Is this a buying opportunity or signs of troubled waters ahead? Let’s find out.
Last quarter, Norwegian Cruise Line Holdings had adjusted earnings of $311.1 million, or $1.35 per share, on $1.28 billion in revenue. Compared with the year ago quarter, this represented 22% earnings growth and 41.6% sales growth. The analyst community was looking for $1.34 EPS on $1.29 billion in revenue, so the company had a modest earnings surprise and a minor sales miss.
The sales miss weighed on shares today. However, I consider this a buying opportunity, if anything. The fact remains that Norwegian Cruise Line has a lot going for it.
For starters, the company is in the middle of a three-year $500 million stock buyback program; it still has over $400 million left to go. This will help the company’s earnings per share going forward.
Norwegian is also in the middle of an exciting transition period, having acquired the parent company of Oceania Cruises and Regent Seven Seas Cruises for $3.025 billion in 2014. The cruise line also recently put a new ship into service—Norwegian Escape—and it plans to launch two additional ships in 2016.
In the meantime, Norwegian Cruise Line is looking to finish FY 2015 on a high note. The company is targeting adjusted earnings between $2.85 and $2.90 per share, which works out to between 25.5% and 27.8% annual earnings growth.
For these reasons, I consider NCLH an excellent buy.