Dj It's Full Speed Ahead For Formula One Stock - Barrons.Com

By Paul R. La Monica

Formula One has sputtered recently. But with earnings in the rearview mirror, a spinoff coming, and a new season of Drive to Survive about to start, investors should use the weakness to scoop up its shares before they get back up to speed.

Liberty Formula One, the tracking stock of John Malone's Liberty Media, is down 3.2% on Thursday after the company reported sales of $1.17 billion, below forecasts for $1.36 billion. The stock has fallen more than 10% over the past two weeks, as investors used increased market volatility as an excuse to take profits in a stock that had gained more than 25% over the past 12 months. Now it looks set to rev back up.

Formula One isn't simple. Tracking stocks, as their name implies, track the performance of a part of a company but don't give investors direct ownership. Malone has been a fan of tracking stocks, using them in the past for stakes in Sirius XM and the Atlanta Braves baseball team. But many investors have complained that tracking stocks are too convoluted. In the case of Formula One, it also represents a 30% stake in concert promoter and Ticketmaster parent company Live Nation. And there are two share classes, the C shares, which include no voting rights, and the lower-volume A shares, which do.

Malone has heard the criticism and now plans to spin off Liberty Live Group into a separately traded company. With the split set to close later this year, F1 will be a cleaner pure-play story. Matthew Harrigan, an analyst at Benchmark, boosted his price target on F1 stock in late December, citing "the removal of a 10% complexity discount" and "the enthusiastic global market for sports assets."

Live sports broadcasts remain popular despite the rapidly changing landscape for television viewing. ESPN's U.S. ratings for F1 telecasts have averaged well over 1 million viewers a race for the past three years. That gives Formula One leverage with media partners as it negotiates a new broadcast deal for 2026. According to media newsletter Puck, ESPN may not bid for an extension, leaving Netflix and Comcast-owned NBC as contenders to win new rights.

Evercore ISI analyst Kutgun Maral estimates the average annual value for a new three-year deal for U.S. rights could increase from $85 million to $150 million. Maral also said F1's increased popularity is driving more marketing deals, and he expects sponsorship revenue this year to jump 30% to $835 million. He expects the stock to jump too, to $130, up 42% from Thursday's midday levels of about $91.50.

That popularity should only increase as its new F1 season kicks off in Australia on March 16 and the latest episodes of Netflix's Drive to Survive reality series stream a week before that. Fans are flocking to the racetracks too. F1 said in Liberty Media's fourth-quarter earnings report that attendance was up 9% in 2024, helping to increase annual revenue by 6%. The sport could get a further image boost now that seven-time world champion Lewis Hamilton, who is joining Ferrari this season, signed a deal to be a brand ambassador for Lululemon. F1 could also get a lift from the F1 movie from Apple Original Films starring Brad Pitt that comes out in June. (Hamilton is a co-producer.)

F1 isn't limiting its empire to car racing. It hopes to acquire motorcycle racing company MotoGP. The deal is currently being reviewed by the European Commission, but TD Cowen's Lance Vitanza expects the merger to go through and adds that MotoGP "would benefit from Liberty Media's expertise in enhancing global reach, improving digital engagement, and attracting new sponsorships."

For F1 stock, the yellow caution flag is about to be pulled back — and replaced with the checkered victory flag.

Write to Paul R. La Monica at paul.lamonica@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

Norwegian Cruise Line Holdings Ltd. NCLH reported solid fourth-quarter 2024 results, with earnings and revenues surpassing the Zacks Consensus Estimate. Both top and bottom lines increased on a year-over-year basis.

Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.

Management attributed the performance to the strength of NCLH's business model, the appeal of its product offerings across brands and the effective execution by both shoreside and shipboard teams. A continued focus on margin improvement helped the company achieve cost savings during the quarter.

Following the results, the company’s shares rose 2.4% in today’s pre-market trading session.

NCLH’s Q4 Earnings & Revenues

Norwegian Cruise reported an adjusted earnings per share of 26 cents, topping the Zacks Consensus Estimate of 11 cents. In the prior-year quarter, the company reported an adjusted loss per share of 18 cents.

Quarterly revenues of $2.11 billion beat the consensus mark of $2.09 billion. In the prior-year quarter, the company reported revenues of $1.99 billion.

Norwegian Cruise Line Holdings Ltd. Price, Consensus and EPS Surprise

Norwegian Cruise Line Holdings Ltd. price-consensus-eps-surprise-chart | Norwegian Cruise Line Holdings Ltd. Quote

Passenger ticket revenues were $1.41 billion compared with $1.33 billion reported in the prior-year quarter. Our model anticipated passenger ticket revenues to be $1.36 billion.

Onboard and other revenues increased to $700.6 million from $653.4 million reported in the prior-year quarter. We expected onboard and other revenues to be $696.4 million.

NCLH’s Expenses & Operating Results

Total cruise operating expenses decreased 1.1% year over year to $1.31 billion, due to lower commissions, transportation and other, as well as fuel and food costs. However, this was partially offset by higher onboard and other costs, and payroll and related expenses.

During the fourth quarter, gross cruise costs per Capacity Day were $285.92 compared with $279.52 reported in the prior year period. Adjusted net cruise costs (excluding fuel) per Capacity Day amounted to about $157.54 compared with $150.70 reported in the prior year period. Fuel price per metric ton (net of hedges) fell to $641 from $726 in 2023.

Net interest expenses were $175.4 million, down from $197.4 million reported in the year-ago quarter.

2024 Highlights of NCLH

Total revenues in 2024 were $9.48 billion, up from $8.55 billion reported in 2023.

Adjusted EBITDA in 2024 was $2.45 billion compared with $1.86 billion reported in 2023.

In 2024, adjusted earnings per share were $1.82, up from 70 cents reported in the previous year.

NCLH’s Balance Sheet

As of Dec. 31, 2024, the company had cash and cash equivalents of $190.8 million, down from $402.4 million at the end of 2023. Long-term debt was $11.78 billion compared with $12.31 billion as of 2023 end.

Booking Update of NCLH

During the fourth quarter, the company reported strong consumer demand across itineraries and brands, which is expected to continue into 2025 and 2026. Bookings remain at an optimal level on a 12-month forward basis. Occupancy during the quarter was 104.9%. The advance ticket sales balance, including long-term bookings, was $3.2 billion at the end of the quarter.

Q1 and 2025 Guidance by NCLH

For first-quarter 2025, NCLH anticipates occupancy to be approximately 101.5% and Capacity Days to be about 5.71 million. For the quarter, adjusted interest expenses are expected to be approximately $170 million, while depreciation and amortization are anticipated to be about $230 million. Adjusted EBITDA is expected to be about $435 million. Adjusted EPS is predicted to be nearly 8 cents.

For 2025, the company anticipates occupancy to be approximately 103.4% and Capacity Days to be about 24.55 million. During the year, adjusted interest expenses are expected to be approximately $700 million. Depreciation and amortization are anticipated at nearly $985 million. Adjusted EBITDA during the year is expected to be nearly $2.72 billion. For 2025, adjusted EPS is currently expected to be nearly $2.05.

NCLH’s Zacks Rank

Norwegian Cruise currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.

Recent Consumer Discretionary Releases

JAKKS Pacific, Inc. JAKK reported fourth-quarter 2024 results, with earnings and revenues missing the Zacks Consensus Estimate after beating the same in the preceding quarter. However, both metrics improved year over year.

The company said its fourth-quarter performance met expectations, with the overall results for the year reflecting strong seasonality, particularly around Halloween and Christmas. JAKK has consistently encouraged customers to adopt its FOB selling model, which allows them to take advantage of larger, more efficient logistics operations.

Live Nation Entertainment, Inc.'s LYV fourth-quarter 2024 earnings and revenues surpassed the Zacks Consensus Estimate. The bottom line increased from the prior-year quarter’s level but the top line declined.

The company has been benefiting from the pent-up demand for live events and robust ticket sales. It continues to gain from the strong performance of Ticketmaster and higher fan spending. The company is set for further growth in 2025, supported by an extensive global concert pipeline and a record number of stadium shows. LYV remains focused on expanding music-centric venues, which are expected to contribute to double-digit adjusted operating income growth, driving sustained momentum in the coming years.

Pool Corporation POOL reported fourth-quarter 2024 results, with earnings and revenues beating the Zacks Consensus Estimate. Both top and the bottom lines declined from the prior-year quarter's actuals.

The company's 2024 results underscore the resilience of its business model amid a challenging macroeconomic environment. It reported enhancements to the POOL360 digital ecosystem, including technology rollouts and expanded digital marketing programs, paving a path for increased sales of private-label chemical products. The company strengthened its sales center network, adding 10 greenfield locations and completing two acquisitions, bringing total footprint to 448 locations worldwide.

This article originally published on Zacks Investment Research (zacks.com).

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