(Bloomberg) -- Norwegian Cruise Line Holdings Inc. cut its forecast for profit this year and next as the cruise industry continues to grapple with the effects of terrorism, the Zika virus and Brexit.
Earnings this year will reach $3.35 to $3.45 a share, down from an earlier target of $3.65 to $3.85, Norwegian said Tuesday in a statement. The Miami-based company will also fall short of its earlier forecast of $5 a share for 2017.
Norwegian CEO Frank Del Rio speaks during a panel discussion at the Cruise Shipping Miami trade show.
Norwegian cited four reasons for downbeat outlook: lower demand for vacations from the U.S. to Europe; a weaker British pound following the U.K. vote to leave the European Union; too much capacity for Miami-based Caribbean tours; and an effort to avoid discounting fares.
“Today is not a happy day here at Norwegian headquarters for the obvious reasons,” Chief Executive Officer Frank Del Rio said during a conference call with analysts Tuesday, adding that under the circumstances the company was forced to “reset expectations.”
Shares of Norwegian plummeted as much as 9.7 percent, the biggest intraday drop in almost three months. Carnival Corp. and Royal Caribbean Cruises Ltd. also fell. Shares of all three cruise operators have declined this year, partially on concern that terrorist attacks in Europe and the Zika virus's spread in Latin America and the Caribbean would hurt tourism.
Del Rio said the terrorist attacks in Brussels, Istanbul and Nice, France -- as well as the attempted military coup in Turkey -- damped demand for European-bound cruises, and happened with such rapid succession that the company was unable to stabilize its bookings.
“This pattern of fits and starts, where bookings would begin to gain some traction only to be quickly stalled by the occurrence of another headline event, has been characteristic of the overall operating environment in the past several months,” Del Rio said.
Norwegian also over-increased capacity in the Caribbean, forcing the company to redeploy vessels to the Baltic region, he added.
On Zika, Del Rio said that while the company hadn't seen an uptick in cancellations because of the spread of the virus, “it is having an effect, I believe, in our South American itineraries.”
“We do have quite a bit of capacity down there, and the situation there is more acute than it may be here in South Florida, and so we are seeing softness in South America and we're having to do more of what we do in the marketplace to stimulate demand for folks to go there,” Del Rio said.
The lower forecasts put Norwegian far behind analysts' estimates of $3.73 a share in earnings this year, though the average projection for next year is $4.77 a share, below the cruise line's original outlook. All 16 analysts tracked by Bloomberg recommend buying Norwegian shares.
- Second-quarter adjusted earnings of 85 cents a share topped the average analyst estimate of 83 cents.
- Sales climbed 9.3 percent to $1.19 billion, missing the $1.22 billion average estimate.
- Net income fell to $145.2 million, or 64 cents a share, from $158.5 million, or 69 cents, a year earlier. Unlike the adjusted figure, net income included share-based executive compensation, a write-off of deferred financing fees and the adjustment of a foreign-exchange collar.
To contact the reporters on this story: Crayton Harrison in New York at tharrison5@bloomberg.net, Brooke Fox in New York at bfox54@bloomberg.net. To contact the editors responsible for this story: Crayton Harrison at tharrison5@bloomberg.net, Paul Barbagallo
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