Norwegian Cruise is heavily investing in China, where a slowdown in the economy could limit discretionary spending. This compares unfavorably with 32.1% for the industry. This is further indicated by the fact that the ratio of the company’s long-term debt to capitalization (expressed as a percentage) is currently 48.3. Long-term debt at the end of the second quarter totaled $5.7 billion. As of Jun 30, 2019, cash and cash equivalents totaled $419.9 million. The company’s heavy reliance on debt financing is concerning. Fuel price per metric ton (net of hedges) grew 2.5% to $493 in the quarter. Gross cruise costs per capacity day grew 8.3%. Adjusted Net cruise costs (excluding fuel) per Capacity Day rose 6.1% on a constant-currency basis and 5.1% on a reported basis. In the second quarter of 2019, total cruise operating expenses rose 11.1% year over year. Moreover, by strengthening the international distribution system, the company may improve yields but at the cost of higher expenses. Fuel costs and net cruise costs are rising persistently. Norwegian Cruise is suffering from high expenses for quite some time. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Let us find out why the Zacks Rank #4 (Sell) company is not a suitable choice for investors at the moment.
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