By Granth Vanaik
(Reuters) -Norwegian Cruise Line on Tuesday forecast downbeat third-quarter profit after a strong second quarter, as elevated costs offset gains from robust demand and higher ticket prices, sending the company’s shares tumbling down more than 13%.
While higher costs have been a nagging pain for most cruise operators, they have also benefited from pent-up demand for leisure travel, with many picking cruises that offer a range on fun activities under one-roof over more expensive land-based vacations.
Royal Caribbean last week forecast an upbeat third-quarter profit and also lifted its annual profit expectations.
Truist Securities analyst Patrick Scholes said the bar for Norwegian was set very high following Royal Caribbean’s results, but a slight raise to annual adjusted EBITDA guidance disappointed investors.
Norwegian Cruise expects annual adjusted EBITDA, a key measure of profitability, between $1.85 billion and $1.95 billion, up from $1.80 billion to $1.95 billion previously.
It also now expects 2023 adjusted profit of 80 cents per share, up from 75 cents.
But for the third-quarter, its adjusted profit forecast of 70 cents per share came below analysts’ average estimate of 79 cents.
Despite undertaking price hikes on its itineraries, Norwegian Cruise has been bogged down by higher borrowing costs, inflation, a stronger U.S. dollar, spiraling marketing expenses and higher labor costs.
Norwegian’s total cruise operating expenses in the second quarter ended June 30 jumped 29% to $1.38 billion.
Rival Carnival has also forecast third-quarter profit below estimates, signaling that rising marketing and labor costs were eating into its gains from higher ticket prices and steady demand.
Shares of rival Carnival and Royal Caribbean were down about 4.1% and 2.2%, respectively, following Norwegian’s results.
Norwegian’s revenue rose 85.8% to $2.21 billion in the reported quarter, above estimates of $2.17 billion, on an adjusted profit of 30 cents per share that beat expectations of 27 cents, according to Refinitiv.
(Reporting by Granth Vanaik in Bengaluru; Editing by Shinjini Ganguli)
