The war in the Middle East has sunk Norwegian Cruise's forecasts. Shares are down 10%

International cruise company Norwegian Cruise Line cut its full-year forecast for adjusted earnings, saying it is seeing lower demand amid heightened geopolitical uncertainty. Such a forecast cut was the first for Norwegian Cruise Line since 2020 - and the sharpest deterioration in expectations compared to rivals Royal Caribbean Cruises and Carnival, Bloomberg noted.

Shares of Norwegian fell by 10% amid the publication of reports, since the beginning of the year they are in minus by 23%. Norwegian Cruise Line is likely to be the most affected by the war among cruise operators, Bloomberg states.

On Monday, Ma. 4, Norwegian said it now expects net yield - a measure of revenue per passenger on board per day - to decline by 2.7 to 4.7 percent in 2026, down from the 0.4 percent growth previously forecast. The cruise operator now also expects adjusted earnings for the year to be in the range of $1.45 to $1.79 per share, well below Norwegian's previous average forecast of $2.38.

Analysts surveyed by FactSet expected the company's net income to grow by 0.1% over the same period, while Norwegian's adjusted earnings for the year were expected to be $2.1 per share, The Wall Street Journal notes.

The company is facing challenges related to the conflict in the Middle East, including higher fuel costs, as well as signs of declining demand as customers reassess their travel plans, especially to Europe, Norwegian said in a release.

"We currently expect the third quarter to be significantly weaker than the second quarter," Norwegian CFO Mark Kempa said during a conference call on the results of the financial statements (quoted by Bloomberg), "reflecting our heavy reliance on European destinations," he explained. At the same time, the company expects net profitability to improve in the fourth quarter of 2026 compared to previous quarters, including the opening of a water park on Norwegian Cruise Line's private island of Great Stirrup Cay in the Bahamas.

Norwegian's updated outlook was released at the same time as its report for the first quarter of 2026, in which the company reported a profit of $104.7 million, or $0.23 per share, compared to a loss of $40.3 million ($0.09 per share) a year earlier. Excluding one-time income and expense items, Norwegian's earnings for the first three months of 2026 totaled $0.23 per share, above analysts' expectations of $0.14. Revenue rose 9.6% year-over-year to $2.33 billion, just short of Wall Street's projected $2.36 billion, the WSJ notes.

Overall, Norwegian said that regardless of the war, "the company entered 2026 with below-target bookings, and the [geopolitical] challenges that have arisen have prevented it from accelerating the pace of bookings and closing the gap." Against this backdrop, Norwegian has been aggressively cutting costs, including administrative and marketing costs, in the first three months of 2026, expecting to save about $125 million a year through business recovery measures under new CEO John Chidsey, according to Reuters. Chidsey took over in February.

"Unfortunately, much of these savings are offset by the additional costs associated with the conflict in the Middle East - in particular, higher airfares for crews and increased logistical costs," Kempa noted.

Cruise operators are facing higher fuel costs as uncertainty surrounding the situation in the Middle East raises the risk of prolonged energy supply disruptions from the Gulf, pushing oil prices up, Reuters specifies.

Norwegian's competitors Carnival and Royal Caribbean have also pointed to potential losses due to rising fuel prices, and a number of global airlines have warned of jet fuel shortages, Reuters writes.

Norwegian shares collapsed by 10% in trading on May 4. Since the beginning of the year, the company's shares have fallen by 23%. For comparison: Royal Caribbean shares fell by 7% over the same period, and Carnival - by 16%. On Ma. 4, they also traded in the negative, although with more modest losses: Royal Caribbean Group fell by 2.7%, and Carnival - by 4%.

Nevertheless, the attitude of Wall Street analysts to Norwegian shares remains moderately optimistic, according to MarketWatch data. 14 analysts recommend to buy shares (ratings Buy and Overweight), 12 more experts advise to keep them in the portfolio (Hold). There are no recommendations to sell Norwegian securities.

This article was AI-translated and verified by a human editor