Norwegian Cruise Line shares fall 10% as soft outlook, wider losses eclipse strong demand

Norwegian Cruise Line shares fell more than 10% on Tuesday after the company posted wider losses than expected and offered soft guidance for the year, despite persistent travel demand.

The cruise company reported fourth quarter losses of $1.04 per share, more than analysts’ estimates of 85 cents.

Norwegian is also projecting full-year earnings per share of 70 cents in 2023, well below expectations of $1.04. The guidance comes as the company struggles to reduce the costs and debt weighing down the business. Norwegian had $13.6 billion in debt as of Dec. 31.

As Norwegian tries to climb back to profitability, it didn’t offer much confidence for the first half of 2023.

CEO Frank Del Rio said the company’s first 2023 quarter “will be the highest cost quarter,” but added that the second half will be better. Norwegian is projecting losses of 45 cents per share in the first quarter, 10 cents higher than Wall Street had anticipated.

Norwegian said its costs continue to rise, exacerbated by inflation, even as it returns more ships to service. Del Rio did not rule out an equity raise to manage debt, but he said it wouldn’t be “prudent to issue more equity to de-lever the company,” even though “there’s a lot of work to do.”

Strong demand is giving the company hope it can ride out the difficulties.

“We’ve seen very, very strong record – near record booking levels dating back to November,” said Del Rio. “So we simply don’t see a weakening consumer.”

Norwegian has lagged behind its competitors, although others are still posting losses as the industry battles higher fuel prices and interest rates.

Royal Caribbean saw its stock jump after posting narrower than expected fourth quarter losses and bookings earlier in February. Morgan Stanley had upgraded the rival company in January, naming it the “superior cruise operator” coming out of the pandemic.

–CNBC’s Seema Mody contributed to this report.