One of the leading cruise operators, Royal Caribbean Cruises Ltd. (RCL) is set to report fourth-quarter and full-year 2014 results on Jan 29, 2015. In the last quarter, the company posted a positive surprise of 0.46%.
This leading cruise operator’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters. It has a positive average earnings surprise of 7.64%. Let’s see what’s in store this season.
Why a Likely Positive Surprise?
Our proven model shows that Royal Caribbean is likely to beat earnings because it has the right combination of two key components.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +21.95%. This is very meaningful and a leading indicator of a likely positive earnings surprise.
Zacks Rank: Royal Caribbean has a Zacks Rank #2 (Buy). Note that stocks with Zacks Rank #1, 2 and 3 have a significantly higher chance of beating earnings. Meanwhile, the Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.
The combination of Royal Caribbean’s Zacks Rank #2 and +21.95% ESP makes us confident of an earnings beat.
Factors to Consider
The company expects adjusted earnings per share in the range of 35 cents to 40 cents in the fourth quarter, significantly up from 23 cents in the fourth quarter of 2013. However, it is marginally below the Zacks Consensus Estimate of 41 cents per share possibly due to high marketing and promotional costs.
Given the strength and diversity of its brands and itineraries, the company has successfully captured potential and repeat cruise vacationers. Europe and Asia itineraries as well as on-board revenues have been outperforming over the past few quarters, thereby more than offsetting the weakness in the Caribbean itinerary.
With strong booking and demand trends, especially for Europe sailings, revenues for the quarter are expected to receive a boost. Net yields are expected to be up approximately 3.5% in the fourth quarter.
Also, the company has deployed more efficient hardware, including propulsion and cooling systems that improve the fuel efficiency of its fleet and thereby reduce fuel costs. Meanwhile, declining oil prices are likely to aid the company in curtailing costs, thereby improving profitability.
The company launched its Double-Double program in the second quarter of 2014 that aims to double 2014 earnings per share by 2017. We expect this program to benefit the company in the near-term too.
Other Stocks to Consider
Here are some other 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 Marcus Corporation (MCS) with an Earnings ESP of +33.33% and a Zacks Rank #2.
Choice Hotels International Inc. (CHH) with an Earnings ESP of +2.70% and a Zacks Rank #1 (Strong Buy).
GoPro, Inc. (GPRO) with an Earnings ESP of +3.23% and a Zacks Rank #2.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment