Will Higher Costs Hit Royal Caribbean's (RCL) Q2 Earnings? - Analyst Blog
Royal Caribbean Cruises Ltd. RCL is set to report second-quarter 2015 results on Jul 31, before the market opens.
In the last quarter, the company posted a positive earnings surprise of 42.86%. In fact, Royal Caribbean has posted a positive earnings surprise in three out of the trailing four quarters with an average positive earnings surprise of 11.48%.
Let’s see what’s in store this season.
Factors to Consider
Royal Caribbean expects adjusted second-quarter earnings per share to be 70 cents, up from 66 cents reported a year ago.
Given the strength and diversity of its brands and itineraries, the cruise operator has successfully captured potential and repeat cruise vacationers. Strong booking and demand trends, especially for Europe sailings, should boost the second-quarter revenues. Despite a slowdown in the Chinese economy, the company’s business should benefit from the solid growth in the cruise industry in the country. Further, revenues are likely to be hit by lower onboard spending by the non-U.S. tourists due to the strong U.S. dollar.
The company has deployed more efficient hardware, including propulsion and cooling systems that improve the fuel efficiency of its fleet. These would increase the company’s investments in the coming quarter, in turn hurting margins.
Earnings Whispers
Our proven model does not conclusively show that Royal Caribbean is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 72 cents. Hence, the difference is 0.00%.
Zacks Rank: Royal Caribbean has a Zacks Rank #3 which when combined with a 0.00% ESP makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stocks to Consider
Here are some companies in the leisure and recreational services industry and consumer discretionary sector that investors may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:
The Madison Square Garden Company MSG, with an Earnings ESP of +4.76% and a Zacks Rank #1.
SeaWorld Entertainment, Inc. SEAS, with an Earnings ESP of +10.00% and a Zacks Rank #2.
Diamond Resorts International, Inc. DRII, with an Earnings ESP of +5.56% and a Zacks Rank #3.
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ROYAL CARIBBEAN (RCL): Free Stock Analysis Report
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