Can Royal Caribbean (RCL) Spring A Surprise In Q1 Earnings?

Global cruise vacation company Royal Caribbean Cruises Ltd. (NYSE:RCL) is scheduled to report first-quarter 2017 numbers on Apr 28, before the opening bell.

Last quarter, Royal Caribbean posted a 0.82% positive earnings surprise. In fact, the company’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, with an average beat of 22.26%.

Let’s see how things are shaping up for this announcement.

Royal Caribbean Cruises Ltd. Price and EPS Surprise

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

Factors Likely to Affect Q1 Results

Given the strength and diversity of its brands and itineraries, this cruise operator has successfully captured the potential and repeat cruise vacationers. Moreover, strong booking and demand trends, capacity growth, technological innovation along with various profit-generating initiatives are expected to drive the quarter’s top- and bottom-line performance.

Particularly, the company’s North American products and Asia-Pacific itineraries are likely to continue performing strongly as has been the trend for the past few quarters. Meanwhile, investments in the Chinese cruise market are likely to further bolster the quarter’s results.

However, lingering global uncertainty in economies like Europe and China might limit revenue growth. In addition, continued strengthening of the U.S. dollar versus the company’s basket of currencies is expected to hurt profits in the to-be-reported quarter. Also, higher marketing and promotional spend along with increased cruise costs may adversely impact the quarter’s margins.

Earnings Whispers

Our proven model does not conclusively show that Royal Caribbean 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: Royal Caribbean has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 92 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Royal Caribbean holds a Zacks Rank #2, which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult.

Notably, we caution you against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

La Quinta Holdings Inc. (NYSE:LQ) has an Earnings ESP of +50.00% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Hilton Worldwide Holdings Inc. (NYSE:HLT) has an Earnings ESP of +10.71% and a Zacks Rank #3.

Time Warner Inc. (NYSE:TWX) has an earnings ESP of +0.69% and a Zacks Rank #3.

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