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Royal Caribbean (RCL) Q3 Earnings to Gain From Solid Booking

Zacks Equity Research
Updated

Royal Caribbean Cruises Ltd. RCL is scheduled to report third-quarter 2018 financial numbers on Oct 25, before the opening bell.

We believe that increased leisure demand and solid booking trends, coupled with the company’s cost-cutting initiatives, are likely to have bolstered both top and bottom-line growth in the third quarter of 2018.

Let’s delve deeper into factors that may have shaped up Royal Caribbean’s third quarter.

Top Line to Gain on Increased Demand

In the second quarter of 2018, Royal Caribbean witnessed revenue growth of 6.5% year over year. The upside was primarily driven by a 5.8% and 8.3% year-over-year increase in passenger ticket revenues, and onboard and other revenues, respectively.

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Given that Royal Caribbean is steadfast in increasing its capacity to match the rising demand, we believe that the positive trend has continued in the to-be-reported quarter as well. Moreover, increased demand has led the company to remain in a solid booking position for the current year.

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. Further, the consensus estimate predicts passenger ticket revenues to increase 23.3% sequentially, while onboard and other revenues are predicted to grow 12.9% from the last reported quarter.

Profitability Initiatives to Boost Bottom Line

Royal Caribbean has been undertaking profitability improvement initiatives, which are aimed at generating long-term cost savings since 2014. Under its Double-Double program, the company aimed to bring return on invested capital (ROIC) to double-digit percentages, and improve revenue yields, control costs and moderate capacity growth. It anticipates 2018 EPS of $8.70-$8.90, reflecting another year of double-digit growth after 2017.

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.

Our Model Suggests a Beat

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. Zacks Rank #4 (Sell) or 5 (Strong Sell) stocks are best avoided, especially if those have a negative Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

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

Other Stocks to Consider

Here are some other companies from the Consumer Discretionary sector that are poised to record an earnings beat this quarter.

Acushnet Holdings GOLF has an Earnings ESP of +28.57% and a Zacks Rank #3. The company is slated to report quarterly results on Nov 1.

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

Penn National PENN has an Earnings ESP of +1.29% and a Zacks Rank #3. The company is scheduled to report quarterly numbers on Nov 1.

SeaWorld Entertainment SEAS is scheduled to report quarterly results on Nov 5. The company presently flaunts a Zacks Rank #1 and has an Earnings ESP of +4.05%.

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With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

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Penn National Gaming, Inc. (PENN) : Free Stock Analysis Report
 
Acushnet Holdings Corp. (GOLF) : Free Stock Analysis Report
 
Royal Caribbean Cruises Ltd. (RCL) : Free Stock Analysis Report
 
SeaWorld Entertainment, Inc. (SEAS) : Free Stock Analysis Report
 
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Zacks Investment Research