Norwegian Cruise Line pricing weak, equity analyst says

By Tom Stieghorst

Norwegian Cruise Line’s prices are sagging, according to SunTrust Robinson Humphrey analyst Patrick Scholes, who reduced his 2014 earnings estimate as a result.

“Based on our survey data, we remain concerned about the persistent direction of pricing trends,” said Scholes, who downgraded his recommendation on the stock from “buy” to “neutral.”

Scholes said a periodic survey of pricing done in May showed prices down in the mid-single digits over the next 12 months. Advertised sailings 1-3 months out were down 5% from last year, an improvement from April, but the fifth consecutive month of decline, he said.

Prices for cruises 4-6 months out were down 6.5%, compared with 8% in April, the second month of decline, while prices 7-12 months out were down 6% for the second straight month.

Contributing to the declines was a narrowing of the premium Norwegian gets on its newer ships, Scholes said, with Norwegian Getaway selling for 3-5% less in May than other ships in the fleet that sail to similar destinations.

In addition, Scholes said onboard spending per passenger has been flat to down for three quarters “suggesting either the newer ships are not as productive as planned or the older ships are fading faster than expected.”

He reduced his 2014 earnings estimate to $449 million from $457 million previously.

Norwegian did not have any comment on the report, a spokeswoman said.

Separately, Scholes said Royal Caribbean International is on track to exceed its own forecast of profits for 2014, with pricing up double digits in May, according to survey data. Carnival Corp. prices were up 8% in May from a year earlier, “as the company laps the easy compares that resulted from the Carnival Triumph incident last year,” Scholes said.

MSC Cruises changes course for Divina

By Tom Stieghorst

MSC Divina in the Caribbean Video

MSC Cruises said the MSC Divina, a ship that was scheduled to sail year-round from Miami, will be moved to the Mediterranean for summer 2015 before returning for the winter of 2015-16 in the Caribbean.

The ship began sailing from Miami in November and was the centerpiece of an MSC marketing campaign in North America. It will continue on current Caribbean itineraries for the rest of 2014 and the first four months of 2015.

In a statement, MSC Cruises USA President Rick Sasso said “customer surveys are showing an increased desire for North Americans to sail onboard MSC Divina in the Mediterranean.”

Industry-wide, Caribbean pricing has suffered from a glut of capacity this year, while demand for European cruises has been surprisingly strong, especially from North America. The weak economies in several European countries and high airfares led some cruise lines to reduce capacity in Europe this year.

MSC said the changes to Divina designed to bring it more in line with American tastes will remain in place for its summer in Europe. Upon returning in the fall of 2015 to the U.S., Divina will get some “surprise enhancements” for the North American market.

In a conference call with analysts earlier Tuesday, Norwegian Cruise Line CEO Kevin Sheehan mentioned the Divina move, saying its arrival in Miami was a significant addition to capacity in the Caribbean that would be removed next summer.