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MARKETS LIVE BLOG:

STOCKS EXTEND GAINS AS RESULTS SEASON KICKS INTO HIGH GEAR

Tech-focused investors prepare for fresh wave of earnings highlighted by struggling Tesla

Royal Caribbean (RCL) Q4 Earnings: Solid Booking Holds Key

Zacks Equity Research

Royal Caribbean Cruises Ltd. RCL is likely to report fourth-quarter 2018 financial numbers on Jan 23. In the last reported quarter, the company delivered a positive earnings surprise of 0.5%. Also, Royal Caribbean’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average being 10.2%.

What to Expect?

The question lingering in investors’ minds now is whether Royal Caribbean will be able to deliver a positive earnings surprise in the quarter to be reported as well. The Zacks Consensus Estimate for fourth-quarter earnings is pegged at $1.51, higher than $1.34 registered in the year-ago quarter. Over the past 30 days, the company’s earnings estimates have witnessed an upward revision of 1 cent. For revenues, the consensus mark stands at nearly $2,312 million, up 15.3% from the prior-year actual figure.

Let’s delve deeper to find out how this global cruise vacation company’s top and bottom line will shape up in the to-be-reported quarter.

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Factors at Play

We expect Royal Caribbean’s fourth-quarter results to be driven by higher passenger ticket revenues, increased leisure demand and solid booking trends coupled with the company’s cost-cutting efforts. Meanwhile, the company’s sailings in the United States, Europe, Alaska, Baltic and Asia are likely to continue performing well. While its capacity growth should aid in meeting the increased demand, ship innovation and technology investments might lead to higher yields.

Based on the current demand scenario, Royal Caribbean expects Asia-Pacific itineraries, the Caribbean and Europe to constitute a respective 18%, 55% and 12% of 2018 capacity.

Moreover, 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 intends to bring the return on invested capital (ROIC) to double-digit percentages, improve revenue yields, control costs and moderate capacity growth. The company expects 2018 EPS to be $8.75-$8.85, reflecting another year of double-digit growth after 2017.

Royal Caribbean Cruises Ltd. Price and EPS Surprise

Royal Caribbean Cruises Ltd. Price and EPS Surprise | Royal Caribbean Cruises Ltd. Quote

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 they 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 +4.41% and a Zacks Rank #3, a combination that suggests that the company is likely to beat estimates.

Stocks to Consider

Here are some stocks that you may also want to consider as our model shows these too have the right combination of elements to deliver a positive earnings surprise:

Cinemark Holdings, Inc. CNK has an Earnings ESP of +10.66% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Brunswick Corporation BC has an Earnings ESP of +3.72% and a Zacks Rank #3.

Norwegian Cruise Line Holdings Ltd. NCLH has an Earnings ESP of +1.74% and a Zacks Rank of 3.

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Norwegian Cruise Line Holdings Ltd. (NCLH) : Free Stock Analysis Report
 
Cinemark Holdings Inc (CNK) : Free Stock Analysis Report
 
Royal Caribbean Cruises Ltd. (RCL) : Free Stock Analysis Report
 
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Zacks Investment Research