Cruise line operator, Norwegian Cruise Line Holdings Ltd. NCLH is scheduled to report its first-quarter 2015 results on May 7.
Last quarter, the company performed disappointingly, with earnings falling short of the Zacks Consensus Estimate of 38 cents by 21.05%. In fact, this was the second earnings miss for Norwegian Cruise Line in the last four quarters. We note that the company has delivered in-line earnings in the other two quarters (the third and first quarters) of 2014. The trailing four-quarter average earnings surprise stands at a negative of 6.14%.
Let’s see how things are shaping up for this announcement.
Factors to Consider This Quarter
We expect first quarter results of this Miami-based company, which offers cruises in various locations including those in the Caribbean, Mexico, Alaska, Europe, Hawaii, New England, Central America, North Africa and Scandinavia, to suffer from the strength of the US dollar. The strength of the dollar has certainly worsened the scenario for ex-US customers as far as payment for goods and services is concerned.
However, weak gasoline prices are boosting travel trends. With the U.S. economy slowly recovering and consumer confidence on the rise, more Americans are now opting for leisure vacations. Moreover, declining gas prices are an added boon for consumers who are benefiting from a better-looking job market and consistent wage increases. We thus expect the company’s top line to be significantly driven by higher passenger ticket revenues.
We are also impressed by the company’s efforts to expand. The cruise operator has been constantly investing in new ships to lower fuel costs, carry more passengers and add onboard amenities like faster Wi-Fi service and upgraded theaters
Earnings Whispers
Our proven model does not conclusively show that Norwegian Cruise Line is likely to beat the Zacks Consensus Estimate this quarter. This 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. Unfortunately, that is not the case here as elaborated below.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently pegged at 0.00% for the company, as both the figures stand at 23 cents.
Zacks Rank: Norwegian Cruise Line has a Zacks Rank #2 which increases the predictive power of ESP. However, 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.
Stocks to Consider
Here are some companies in the broader Consumer Discretionary sector you may want to consider as our model shows these have the right combination of elements to post an earnings beat:
Twenty-First Century Fox FOXA carries a Zacks Rank #3 and has an earnings ESP of +2.56%. The company is scheduled to report its quarterly results on May 6.
Intrawest Resorts Holdings Inc. SNOW carries a Zacks Rank #2 and has an earnings ESP of +2.17%. The company is scheduled to report its quarterly results on May 7.
Mohawk Industries MHK carries a Zacks Rank #3 and has an earnings ESP of +3.11%. The company is scheduled to report its quarterly results on May 7.
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