• It's Coming...

    MARKET EDGES

    Identify global risks and opportunities with essential macro intel using Hedgeye’s Market Edges.

Consensus estimates, management guidance and commentary, and questions for management in preparation for the earnings release/call tomorrow.

1Q14 GUIDANCE/CONSENSUS

NCLH 1Q 2014 - EARNINGS PREP - n

QUESTIONS FOR MANAGEMENT

  • What was the decision making behind sailing Eastern Caribbean year round for Escape?
  • Will cost cutting be the driver to meeting guidance this year?
  • How should we think about the Caribbean pricing pressure?  Is it mainly an aggressive promotional environment from MSC and Carnival or is demand faltering?
  • Is NCLH responding to the fierce marketing tactics by Carnival i.e. will marketing expenses go higher this year?
  • Getaway/Breakaway premiums have remained relatively steady.  But is that due to plummeting prices from its peers in their respective markets?
  • Is Europe strong overall or are some stronger regions offsetting others?
  • How do you feel about the Quantum competition in Q4?

RECENT MANAGEMENT COMMENTARY

1Q:  

  • Solid quarter.  Will be more on the ticket side in terms of improvement as opposed to load

Bookings outlook:

  • Thinks they lost a little bit of ground but not anything to be concerned.  Is comfortable with each of the quarters.

Breakaway:

  • Breakaway is going to have another very good year, and the pricing is in the zone of where it was last year

Getaway:

  • We've been having a consistent performance in the Miami market

Promotional:

  • Environment has remained in a promotional state

Alaska: 

  • Some softness in Alaska where the introduction of a third ship for the first time since 2009 was coupled with a unique itinerary
  • Feel pretty good about Alaska

Caribbean/Bermuda:

  • There's a lot of capacity in Miami, but it's no different than anything else
  • More focused today on Bermuda and optimizing that opportunity in that premium itinerary.

Europe:

  • Feel pretty good about Europe

Fuel efficiency: 

  • Expect consumption savings to increase as further energy saving initiatives are implemented and NCLH take delivery of newer more fuel-efficient ships.
  • Have received exemptions from the appropriate regulatory agencies to burn high-filter bunker fuel until installed. These scrubbers carry a very attractive return on investment and reduce our sulfur emissions to comply with the upcoming eco fuel Standards.

2Q NCC:

  • Expect adjusted net cruise cost, excluding fuel per capacity day, to decrease around 3% in 2Q

Cost cuts:

  • Leveraging SG&A, with bringing on these additional ships and their being roughly double the size of NCLH's existing fleet.

Organic pricing/ comp fleet:

  • Very positive

Capital allocation:

  • Shorter-term solution or answer would be to do some stock acquisition.  If the selling shareholders are still in the puzzle,could marry with that at the appropriate discounts or whatever. And then, at some point, start a dividend (probably would be at least a year later than the first step with the share repurchase).

Onboard:

  • Haven't changed pricing