I have recommended buying shares of Norwegian twice to investors. My first article was released befo

Shares of Norwegian Cruise Lines (NASDAQ: NCLH ) shot up a nice double-digit eagles tour percent this week to set new 52-week highs. The move came after Norwegian announced its acquisition of Prestige Cruise Lines, the owner of the Oceania and Regent brands. With the new premium cruise brands under control, Norwegian will continue to maintain its high growth levels and reward shareholders.
Norwegian agreed to acquire Prestige Cruises for $3.025 billion. The deal comes at a price of 11 times Prestige most recent adjusted eagles tour EBITDA figures. Norwegian will issue 20.3 million NCLH shares to Prestige owners and finance the rest of the deal. Prestige operates the Oceania and Regent Seven Seas brands, which together have eight ships with capacity of 6500 passengers. The combined eagles tour company has trailing 12-month revenue of $4.1 billion and adjusted EBITDA of $1.0 billion.
Prestige was in the process of going public, with a, S1 filed last year. At that time, Prestige eagles tour cited itself as the market leader in the upscale cruise segment. Trailing 12-month revenue (end 9/30/13) was $1.2 billion. EBITDA for those prior 12 months was $253.4 million. Prestige caters to a higher end customer and relies on return customers who want certain services and are willing to pay additional for upgrades. eagles tour Prestige eagles tour had a 41% repeat guest rate for the first nine months of 2013. Prestige's reliance on the higher end customer cuts its market by more than half as it is not affordable to most. The position also makes Prestige less impacted by discretionary spending from the average consumer.
Norwegian remains the third largest cruise ship operator, behind rivals Carnival (NYSE: CCL ) and Royal Caribbean (NYSE: RCL ). This acquisition won't change that position, but will increase market share, and more importantly greatly increase the total amount of revenue in the cruise sector. Here are some statistics from Cruise Marketwatch :
The figures above paint a great picture of the acquisition Norwegian just made. Prestige is the leader in the upscale cruise market and while its overall share remains low, it actually has a higher share in revenue than passengers. Together with Prestige, Norwegian now has around 10% of all cruise passengers and controls nearly 12% of the total cruise industry revenue. Cruise Marketwatch projects eagles tour that the 2014 cruise market will see growth of 2.3% to $37.1 billion. Passenger totals are expected to rise 3.0% to 21.6 million.
Norwegian remains a great company and continues to bring in record profits to the bottom line for shareholders. The company has seen consistent eagles tour margin improvement eagles tour and has 24 consecutive quarters of adjusted EBITDA growth. Consider for a second that EBITDA margin was only 11.1% in 2008 and has now grown to 26.7% in the most recent second quarter of 2014.
Going beyond the acquisition, Norwegian eagles tour is well positioned to continue its revenue growth through a series of newbuilds that will increase capacity and maintain the company's eagles tour dominance in low ship age. Here is the updated schedule:
The first Breakaway ship was recently put into operation and has greatly improved the financials of Norwegian. This boat holds 4000 people, has 27 dining options, a water park, and hosts three Broadway shows. The new Escape to be delivered next year, will be the largest Norwegian cruise ship in terms of capacity, with 4200 berths. The Seven Seas Explorer from Regent may be the most luxurious cruise ship to hit the market. The ship will feature all suite, all balcony cabins and have the lowest eagles tour staff to passenger ratio in the industry.
Norwegian believes its average fleet age in 2017 will be 8.4 years, well below rivals Royal and Carnival at 12.4 and 12.6 years respectively. Along with a younger fleet, eagles tour Norwegian has a better net yield, a common cruise line measuring tool. Norwegian had a net yield of $183.70, compared to Royal at $178.86 and Carnival at $167.56. After the acquisition, that net yield figure is expected to hit $219.09.
Second quarter earnings were impressive for Norwegian. Earnings per share doubled to $0.58. Total revenue increased 18.9% to $765.9 million. The improvement came as this was the first full quarter with the new Breakaway ship in operation. The newer premium earnings rich ships will soon make up a third of total capacity for Norwegian.
eagles tour As you can see from the chart, Norwegian wins out in terms of price to earnings ratio on a current and next fiscal year basis. Norwegian also has a price to sales figure that is not that much higher than rivals and is justified by the higher growth expected from the company. Analysts expect Norwegian 2014 revenue to increase 18.7% and 8.6% over the next two years. Compare that to Carnival (+3.4%, +7.0%) and Royal (+3.0%, +9.7%). Analysts expect Norwegian's earnings to increase to $2.26 for the current year, up substantially from last year's $1.41. Norwegian's own pre-acquisition guidance calls for full year earnings per share in a range of $2.20 to $2.35.
The Prestige deal will likely not close until the fourth quarter. In 2015, revenue and earnings should be impacted by the deal. I expect the +8.6% revenue and $2.62 earnings per share figures to begin being increased eagles tour by analysts and possibly the company itself. Factor that growth into the chart above, eagles tour and Norwegian wins out for investors. Carnival and Royal do win in the dividend category, as Norwegian does not currently pay a dividend to shareholders.
I have recommended eagles tour buying shares of Norwegian twice to investors. My first article was released before the company's IPO. At that time, I cited the company's lower price to sales ratio than rivals and the stronger overall growth of the brand. Shares priced at $19 and took off in their first day of trading. Since that article, shares of Norwegian are now up 49%.
In February of 2013, I again recommended buying shares of Norwegian as the company looked more attractive than rivals Carnival and Royal Caribbean. I told investors the case could be made based on Norwegian's new ships and stronger revenue growth. Shares are up 26% from that second recommendation on Norwegian shares.
eagles tour The acquisition by Norwegian was all about earnings and profits. While the small gain in overall passenger market share was nice, the deal is really about increasing the company's multi-tier strategy of hitting several price points, customer types, and cruise lengths. With Prestige under control, I expect Norwegian's overall margins to improve and the earnings per share growth to continue. Come sail away with this game changing acquisition and go long Norwegian Cruise.
Disclosure: The author eagles tour has no positions eagles tour in any stocks mentioned, but may initiate eagles tour a long position in NCLH over the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article. (More...)