Consumer

Tara Lachapelle is a Bloomberg Gadfly columnist covering deals. She previously wrote an M&A column for Bloomberg News.

Just in time for the long Labor Day weekend, Tropical Storm Hermine is threatening to wash out cookouts up and down the U.S. East Coast. For cruise line operators such as Norwegian -- whose shares have already taken a hit this year amid the Zika-virus outbreak, terrorist attacks and the currency repercussions of the U.K.'s Brexit vote -- it represents another travel damper.  

Rough Seas
It's been a choppy year for the cruise industry -- and for shares of Norwegian Cruise Line in particular. They've retreated to levels last seen in mid-2014, when the company was acquiring Prestige Cruises.
Source: Bloomberg

Norwegian said this month that it won't earn as much in 2016 and 2017 as it previously forecast. There's also concern about industry yields, which measure customer revenue relative to available cruise days (Norwegian's net yield tops that of Carnival and Royal Caribbean). Even so, its stock price may be painting an overly bleak picture.

Coasting
Buying the higher-end Prestige Cruises helped Norwegian generate more money from passengers during cruising days than its two biggest rivals. Still, there's concern that yield growth is slowing across the board.
Source: Bloomberg Intelligence

Today happens to mark the second anniversary of Norwegian striking a $3 billion deal to buy the upscale Prestige Cruises from private equity firm Apollo Global Management. And while the transaction seems to have substantially increased Norwegian's selling, general and administrative expenses, lower fuel prices have helped offset that and operating profit has surged. Most analysts still see it reaching the $1 billion level this year, up more than 40 percent from 2015.

Making Progress
Norwegian Cruise Line -- along with its rivals -- face plenty of headwinds this year. But lower fuel prices have helped lift the company's operating income quite a bit.
Source: Bloomberg

What's more, CEO Frank Del Rio disclosed this week that he purchased about $3 million worth of Norwegian stock. According to Wolfe Research analyst Jared Shojaian, that's the largest open market purchase by a cruise-line executive in history. (Del Rio, co-founder of Oceania Cruises, previously ran Prestige. He was then put at the helm of Norwegian shortly after the deal closed.)

They say the wind and the waves are always on the side of the ablest navigator. Del Rio is demonstrating great confidence in the company's ability to sail through these choppy waters.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

  1. There's also probably some residual apprehension of taking a cruise following the unfortunate "poop cruise" incident aboard a Carnival ship in early 2013. Speaking of which, a downgrade of Carnival's shares Friday sparked a sympathy swoon at Norwegian, as if things weren't bad enough.

To contact the author of this story:
Tara Lachapelle in New York at tlachapelle@bloomberg.net

To contact the editor responsible for this story:
Beth Williams at bewilliams@bloomberg.net