Leisure Stocks Reporting Q3 Earnings on Nov 7: MAR & RCL

The Q3 earning season is in its tail end and the widely diversified Consumer Discretionary sector has grabbed attention.

Per the latest Earnings Preview, revenues are expected to rise 2.8% in Q3. However, the sector’s earnings are projected to record a decline of 1.2%.

Leisure Stocks in Focus

The performance of the leisure companies from the Consumer Discretionary sector has been impressive so far this earnings season. Notably, leisure stocks mostly perform well during spring and summer.

Among the leisure stocks that have already reported, Carnival Corporation CCL, Pool Corporation POOL, Polaris Industries Inc. PII and International Speedway Corporation ISCA have delivered strong results, with their bottom and top lines outpacing the Zacks Consensus Estimate.

Let’s take a look at two key leisure stocks that are set to report their third-quarter results on Nov 7. Will these companies manage to put up a decent performance?

Marriott International, Inc. MAR came up with a positive earnings surprise of 10.78% last quarter. In fact, the company’s earnings have been surpassing the Zacks Consensus Estimate consistently in the last 14 quarters, with an average positive surprise of 6.33% in the trailing four.

Our proven model also shows that an earnings beat is likely for Marriott this time around. This is because the company has the right combination of the two key ingredients — a Zacks Rank #3 (Hold) or better and a positive Earnings ESP — to increase its odds of an earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

For the quarter, the company has an Earnings ESP of +0.20% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Given Marriott’s increased scale and distribution post Starwood purchase, its top line is likely get a boost in the to-be-reported quarter. This, in turn, is expected to drive the bottom line and aid in keeping the earnings streak alive. Notably, the Zacks Consensus Estimate for earnings and revenues in the to-be-reported quarter is pegged at 98 cents and nearly $5 billion, respectively.

Moreover, the company has been witnessing increased revenue per available room (RevPAR) in most markets around the world over the last few quarters. The trend is expected to continue in the third quarter as well. However, lingering global uncertainties, competition in domestic market along with negative currency translation might somewhat dent results (read more: Can Marriott Keep its Earnings Streak Alive in Q3?).

Global cruise vacation company, Royal Caribbean Cruises Ltd. RCL delivered a positive earnings surprise of 2.40% in the previous quarter. Also, the company’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, with an average beat of 3.52%.

This Zacks Rank #3 company has an Earnings ESP of -1.10%, which makes surprise prediction difficult in this quarter.

Yet, strong booking and demand trends along with various profit-generating initiatives (particularly its Double-Double program) are expected to drive the quarter’s top and bottom-line performance. The Zacks Consensus Estimate for earnings in the third quarter is pegged at $3.43, reflecting an increase of 7.1% over the prior-year quarter. Additionally, the quarter’s revenues are anticipated to improve 0.5% year over year to $2.58 billion.

Meanwhile, higher-than-anticipated load factors, timing and investment in revenue-generating activities are adding to the company’s costs. Net cruise costs (NCC), excluding fuel, are also likely to be up about 4% to 4.5%. This increase in the cost metric primarily implies a year-over-year capacity reduction. The consensus estimate for the same also reflects a rise of 4% (read more: What to Expect From Royal Caribbean in Q3 Earnings?).

Stay tuned! Check back on our full write-up on earnings releases of these stocks.

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