Factors Setting Tone for Norwegian Cruise (NCLH) Q3 Earnings

Norwegian Cruise Line Holdings Ltd. NCLH is scheduled to report third-quarter 2019 results on Nov 7. In the last reported quarter, the company delivered a positive earnings surprise of 3.2%.

Q3 Expectations

The Zacks Consensus Estimate for third-quarter earnings is pegged at $2.16, indicating a 4.9% decline from the year-ago reported figure. Over the past 30 days, the company’s earnings estimates have been downwardly revised by a penny. The consensus mark for quarterly revenues is pegged at nearly $1.9 billion, suggesting 2.5% growth from the prior-year reported figure.

Factors at Play

Norwegian Cruise Line's top line in the third quarter is likely to have been driven by robust passenger ticket, onboard and other revenues. The Zacks Consensus Estimate for passenger ticket revenues suggests year-over-year growth of 2.5% to $1,368 million. The same for onboard and other revenues is pegged at $536 million, indicating a 2.3% year-over-year increase.

Strong cruise demand and capacity growth are likely to have acted as tailwinds to Norwegian Cruise. Additionally, higher yield and fleet-expansion efforts may have enabled the company to gain traction. Its focus on the lucrative Chinese market is likely to have been an added positive. Norwegian Cruise’s measures to expand its fleet size are expected to have benefited the to-be-reported quarter’s performance.

However, increase in fuel costs and net cruise expenses, along with Trump’s ban on travel to Cuba are likely to have weighed on the company’s bottom line in third-quarter 2019. It expects net cruise costs (excluding Fuel per Capacity Day) to be roughly 8.3% in constant currency. Worryingly, the company may have been exposed to foreign exchange-related risks, as it operates globally.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Norwegian Cruise this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That is not the case here.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Norwegian Cruise has an Earnings ESP of -0.29% and a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks Poised to Beat Earnings Estimates

Here are some stocks from the Consumer Discretionary sector that investors may consider, as our model shows that these have the right combination of elements to come up with an earnings beat in the to-be-reported quarter:

Lululemon Athletica Inc. LULU has a Zacks Rank #2 and an Earnings ESP of +1.54%.

Under Armour, Inc. UAA has a Zacks Rank #3 and an Earnings ESP of +9.37%.

Ralph Lauren Corporation RL has a Zacks Rank #3 and an Earnings ESP of +0.21%.

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