Norwegian Cruise Slashes Profit Forecast as Fuel Costs Continue to Rise

Norwegian Cruise Line cut its annual profit forecast on Monday, as the cruise operator battles surging fuel costs linked to the war in the Middle East and tepid demand for its sea voyages, sending its shares down 7% in morning trading.

Global oil prices surged above $100 a barrel after U.S. and Israeli strikes on Iran led to the closure of the Strait of Hormuz. More than $50 billion worth of crude oil supply has been lost since the start of the war, according to Reuters calculations as of mid-April.

Rivals Carnival and Royal Caribbean have also highlighted potential hits from rising fuel costs, and several global airlines have warned of jet fuel shortages.

About half of its fuel consumption for the year was hedged, and net of that, Norwegian expects annual fuel prices of $782 per metric ton, based on spot rates as of April 28, up from the prior $670.

The Middle East conflict has forced consumers to re-evaluate travel plans, particularly to Europe, Norwegian said, adding that the current booking range was below optimal after execution missteps led to shorter Caribbean itineraries.

Norwegian now expects fiscal 2026 adjusted profit between $1.45 and $1.79 per share, compared with its prior forecast of $2.38.

COST CUTS IN ACTION

Norwegian is also cutting costs as part of its turnaround strategy under new CEO John Chidsey after the cruise operator came under pressure from activist investor Elliott Investment Management.

The company was making some role and position adjustments to its shoreside organization, a Norwegian Cruise Line spokesperson told Reuters.

In the reported quarter, the company recorded restructuring expenses of $12.2 million. Executives said on a post-earnings call that annual salary and benefits costs would reduce by 15% for 2026. Payroll expenses for 2025 were $1.40 billion.

Its first-quarter revenue of $2.33 billion missed analysts' average estimate of $2.36 billion, according to data compiled by LSEG. But its adjusted profit of 23 cents beat estimates of 14 cents, partly due to the company's cost savings.

The forecast cut is a possible reset, with management execution now even more critical to get Norwegian back to an earnings growth trend, Jefferies analysts said in a note.

Stock performance of major cruise operators so far this year https://www.reuters.com/graphics/ROYAL%20CARIBBEAN-RESULTS/jnpwrrbwyvw/chart.png

(Reuters)