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Norwegian Cruise Line (NCLH) Q1 Earnings: A Beat in Store?

We expect Norwegian Cruise Line Holdings Ltd. NCLH to report better-than-expected earnings in the first quarter of 2017. The company will release its results May 10, before the market opens.

In the fourth quarter of 2016, the Miami, FL-based cruise company had reported lower-than-expected earnings per share. Earnings, however, improved 6.7% on a year-over-year basis owing to lower costs. Also, revenues of $1,125.1 million topped the Zacks Consensus Estimate of $1,112.1 million. The top line expanded 8.6% from the year-ago figure.

In fact, an earnings beat might not be too difficult in the first quarter either because of the conservative nature of the Zacks Consensus Estimate. But the measure for the first quarter of 2017 is significantly below the comparative fourth-quarter 2016 figure of 56 cents.

The stock has outperformed the Zacks categorized Leisure and Recreation Services industry over the last three months. Shares of Norwegian Cruise rallied 15.4% compared with the industry’s gain of 9.9% in the period.

 

What Does Our Model Say?

Our quantitative model also shows that the company is likely to beat earnings because it has the perfect combination of two key ingredients. Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) have a significantly higher chance of beating earnings estimates.

Zacks ESP: The Earnings ESP for Norwegian Cruise is +2.70% with the Most Accurate estimate exceeding the Zacks Consensus Estimate of 37 cents per share by a penny. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Norwegian Cruise carries a Zacks Rank #3. In fact, the combination of Norwegian Cruise’s favorable Zacks Rank and a positive ESP makes us reasonably confident of earnings beat.

 Note that we caution against stocks with Zacks Ranks #4 or 5 (Sell-rated) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Norwegian Cruise Line Holdings Ltd. Price and EPS Surprise

 

Norwegian Cruise Line Holdings Ltd. Price and EPS Surprise | Norwegian Cruise Line Holdings Ltd. Quote

What's Driving the Better-than-Expected Earnings?

We expect Norwegian Cruise’s first quarter results to benefit from increasing business and leisure travel driven by improving economic indicators and improved job market scenario. Strong Mediterranean booking trends along with capacity growth might bolster the quarter’s results.

A positive consumer sentiment is driving demand for leisure and recreational activities. The company expects earnings (excluding special items) of approximately 36 cents in the first quarter of 2017.

Also, we expect a commentary on the conference call on rumors that Chinese firm HNA Group might acquire a company in the space. Rumors had positively impacted not only the Norwegian Cruise stock, but also its peers like Royal Caribbean Cruises RCL and Carnival Corp. CCL.

Another Stock to Consider

Investors interested in the broader Consumer Discretionary space may also consider Laureate Education Inc. LAUR. The company has an earnings ESP of +3.66% and a Zacks Rank #2. The company will report first-quarter 2017 results on May 11. You can see the complete list of today’s Zacks #1 Rank stocks here.

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Carnival Corporation (CCL): Free Stock Analysis Report
 
Royal Caribbean Cruises Ltd. (RCL): Free Stock Analysis Report
 
Norwegian Cruise Line Holdings Ltd. (NCLH): Free Stock Analysis Report
 
Laureate Education Inc. (LAUR): Free Stock Analysis Report
 
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