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Carnival (CCL) to Report Q2 Earnings: What’s in the Cards?

Zacks

Cruise and vacation company Carnival Corporation CCL is slated to release second-quarter fiscal 2017 results on Jun 22, before market opens.

Last quarter, Carnival had delivered a positive earnings surprise of 8.57%. In fact, the company’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, with an average beat of 12.83%.

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

Carnival Corporation Price and EPS Surprise

Carnival Corporation Price and EPS Surprise | Carnival Corporation Quote


Factors Likely to Affect Q2 Results

Along with its first-quarter fiscal 2017 results, the company had issued a guidance range of 43 cents to 47 cents for adjusted earnings per share in the fiscal second quarter. Carnival had factored in year-over-year growth in net revenue yields (constant dollars) in the band of 2.5–3.5% and a 1.5–2.5% increase in net cruise costs, excluding fuel per ALBD, while projecting its earnings per share.

We are positive on Carnival’s strategy to grow beyond its familiar itineraries and capitalize on new markets. In fact, the company is confident about its fiscal second-quarter results to reflect growth in China and other Asian markets as well as expansion in relatively other untapped markets like Cuba, Bermuda and Mexico. Further, the launch of several new ships in a bid to form additional demand creation opportunities should drive top-line growth.

Notably, in third quarter of fiscal 2016, the company had launched the initial phase of its yield management system, which is expected to aid in driving incremental revenue yields in the to-be-reported quarter. In addition, Carnival predicts the quarter’s revenue yields to improve on the back of marketing initiatives and a better booking environment.

Moreover, the company remains focused on its cost-containment efforts, including decreased fuel consumption that is likely to aid the quarter’s margins.

However, negative currency translation and increased marketing expenses might hamper the quarter’s performance. Most firms expect a likely increase in fuel costs to weigh on the company’s profits. Meanwhile, macroeconomic issues in key operating regions are expected to affect the company’s top line.

Earnings Whispers

Our proven model does not conclusively show an earnings beat for Carnival 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: Carnival has an Earnings ESP of -2.13%. This is because the Most Accurate estimate is 46 cents, while the Zacks Consensus Estimate is pegged higher at 47 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Carnival has a Zacks Rank #3, which increases the predictive power of ESP. However, the company’s negative 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:

Live Nation Entertainment, Inc. LYV has an Earnings ESP of +11.77% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Marriott Vacations Worldwide Corporation VAC has an Earnings ESP of +8.07% and a Zacks Rank #3.

Norwegian Cruise Line Holdings Ltd. NCLH has an Earnings ESP of +1.04% and a Zacks Rank #3.

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