Leisure Stocks Q3 Earnings Due on Oct 25: RCL, WYNN & More
The third-quarter earnings season is underway, with 84 S&P 500 companies having released their quarterly numbers (as of Oct 19). Per the latest Earnings Preview, 82.1% of the companies, which reported results, surpassed earnings estimates while 61.9% beat revenue estimates. Further, total earnings of these companies increased 19.2% from the same period last year on 8.4% higher revenues.
The report projects 19.2% year-over-year rise in total earnings for S&P 500 companies, with revenues likely to increase 7.2%. This compares with the year-over-year increase of 25.2% for earnings in the second quarter.
Tricky Scenario for Consumer Discretionary Sector
Like some other sectors, the widely diversified Consumer Discretionary sector (among 10 of the 16 Zacks categorized sectors) is likely to put up a decent show in Q3 earnings.
Currently, the domestic economy is favorable for the consumer discretionary sector on increased demand for goods and services. Steady rise in wages, lower unemployment and upbeat consumer confidence indicate that stocks in the sector stand to rake in handsome gains.
However, recent trade worries, concerning imposition of tariffs, might substantially curtail consumer spending on leisure services. Moreover, Trump’s stringent policies on immigration and tourist visas seem to have impelled international visitors to rethink their vacation plans to the United States. Evidently, there has been a continued slowdown in U.S.-bound air travel bookings ever since Trump took charge.
Per the Earnings Trends as of Oct 17, total earnings for the sector are expected to increase 9.3% in the third quarter, lower than 18.1% growth attained in the last reported quarter. Revenues are projected to grow 8%, higher than 6.4% growth recorded in the last reported quarter. Even though margins are not expected to outpace the second quarter’s increase of 1.1%, it is projected to rise 0.1% in the third quarter.
What Lies Ahead for the Leisure Space?
There is no denying that the leisure space, belonging to the consumer discretionary sector, is highly vulnerable to economic fluctuations. This is because these stocks are part of a cyclical industry where demand for goods and services is relatively elastic and any significant change in the general market often affect consumers’ preference.
However, a few leisure companies are poised to gain from increased consumer spending. Meanwhile, Federal Reserve raised its outlook on U.S. economic growth. The median real GDP forecast increased from 2.7% to 2.8% for the current year. This is also likely to support the industry’s growth in 2018.
Stocks Expected to Report Q3 Earnings on Oct 25
Wynn Resorts, Limited WYNN, a leading casino operator, is expected to post quarterly earnings of $1.77 in the third quarter, which marks an increase of 16.5% from the year-ago quarter. Revenues are estimated to be $1.64 billion, reflecting rise of 1.61% from the year-ago quarter.
The company’s greater focus on non-gaming revenues is likely to have boosted third-quarter revenues and earnings. Further, optimism surrounding tourism in Las Vegas and increasing visitation pattern are likely to drive revenues. (Read More: Non Gaming Revenues to Boost Wynn Resorts Q3 Earnings)
However, our proven model does not predict a beat for Wynn Resorts in the quarter to be reported. That is because a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for that to happen. Unfortunately, that is not the case here, as you will see below.
The company has an Earnings ESP of -3.96% and a Zacks Rank #5 (Strong Sell). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Wynn Resorts, Limited Price and EPS Surprise
Wynn Resorts, Limited Price and EPS Surprise | Wynn Resorts, Limited Quote
Another gaming giant, Boyd Gaming Corporation BYD has an Earnings ESP of 0.00% and a Zacks Rank #1. Despite the favorable rank, the company is less likely to beat earnings estimates in the third quarter.
You can see the complete list of today’s Zacks #1 Rank stocks here.
However, Boyd Gaming is likely to have witnessed revenue and earnings growth in the third quarter given its operational excellence and well-maintained portfolio. The company continues to expand portfolio by strengthening current operations and growing through capital investment as well as other measures.
Subsequently, the consensus estimate for revenues in the to-be-reported quarter is pegged at $607.6 million, marking an increase of 3.4% from the year-ago quarter’s revenues. Earnings for the third quarter are also projected to increase 4.6% year over year.
Boyd Gaming Corporation Price and EPS Surprise
Boyd Gaming Corporation Price and EPS Surprise | Boyd Gaming Corporation Quote
The cruise giant, Royal Caribbean Cruises Ltd. RCL is likely to have witnessed both top and bottom-line growth in the third quarter. We believe that increased leisure demand and solid booking trends, coupled with the company’s cost-cutting initiatives, are major growth drivers.
Subsequently, the Zacks Consensus Estimate for revenues in the third quarter is pegged at $2.8 billion, reflecting 9.8% growth from the year-ago quarter.
Meanwhile, Royal Caribbean has been undertaking profitability improvement initiatives, which are aimed at generating long-term cost savings since 2014. For the third quarter, the company expects adjusted earnings per share of $3.90-$3.95. The Zacks Consensus Estimate for the quarter under review is currently pegged at $3.96, suggesting 13.5% growth from the year-ago quarter. (Read More: Royal Caribbean Q3 Earnings to Gain From Solid Booking)
Royal Caribbean has an Earnings ESP of +0.19% and a Zacks Rank #3, a combination that suggests that the company is likely to beat estimates.
Royal Caribbean Cruises Ltd. Price and EPS Surprise
Royal Caribbean Cruises Ltd. Price and EPS Surprise | Royal Caribbean Cruises Ltd. Quote
The Marcus Corporation MCS, an entertainment company, currently flaunts a Zacks Rank #1. However, with an Earnings ESP of 0.00%, the odds of an earnings beat in the third quarter are much less.
Nonetheless, the company is poised to witness revenue and earnings growth in the third quarter. The consensus estimate for revenues in the to-be-reported quarter is pegged at $169.5 million, suggesting 10.2% growth from the year-ago quarter.
Further, per the consensus estimate, earnings in the third quarter are expected to be 52 cents, reflecting 33.3% year-over-year increase.
Marcus Corporation (The) Price and EPS Surprise
Marcus Corporation (The) Price and EPS Surprise | Marcus Corporation (The) Quote
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