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Why Norwegian Cruise Line Stock Jumped Today

The Motley Fool · 10/30 01:04

Key Points

  • Norwegian is offsetting higher fuel costs with an effective cost-savings plan.

  • The company is prudently paying down debt.

Shares of Norwegian Cruise Line (NYSE:NCLH) rose more than 13% on Thursday after the travel company reported stronger-than-expected profits.

Illuminated cruise ship sailing on ocean waves beneath a purple and orange sunset sky.

Image source: Getty Images.

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Efficiency gains

Norwegian's revenue inched up less than 1% year over year to $2.9 billion in the third quarter. The cruise ship operator said an increase in last-minute bookings and higher onboard guest spending contributed to the gains.

The company's expense-reduction initiatives helped to offset rising fuel costs related to conflict in the Middle East. Adjusted net cruise cost, excluding fuel, per capacity day improved by 2.2% to $152.

"We delivered third-quarter results that came in above guidance, all while continuing to strengthen our commercial capabilities, improve operating efficiency, and enhance the guest experience," CEO John Chidsey said.

All told, Norwegian's adjusted net income checked in at $514 million, or $1.12 per share. That bested Wall Street's projections, which had called for per-share earnings of $0.93.

These profits, combined with asset sales, are enabling the travel company to strengthen its balance sheet by paying down debt, thereby reducing the risks for investors.

Raised guidance

These encouraging results and ongoing cost-saving trends prompted Norwegian to heighten its full-year financial targets. Management now projects adjusted net income of $789 million, or $1.70 per share. That's up from a previous forecast of $700 million, or $1.50 per share.

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.