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Will Ticket Revenues Aid Royal Caribbean (RCL) Q2 Earnings?

Zacks Equity Research

Royal Caribbean Cruises Ltd. RCL is likely to report second-quarter 2019 financial numbers on Jul 25. In the last reported quarter, the company delivered a positive earnings surprise of 18%. The bottom line also surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average being 8.8%.

Which Way Are Estimates Moving?

The Zacks Consensus Estimate for second-quarter earnings is pegged at $2.46, higher than $2.27 registered in the year-ago quarter. Over the past 30 days, the company’s earnings estimates have witnessed a downward revision of 2 cents. For quarterly revenues, the consensus mark stands at nearly $2,794 million, implying 19.6% improvement from the prior-year reported 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

Royal Caribbean’s second-quarter results are likely to be driven by robust Passenger Ticket revenues as well as Onboard and other revenues. The Zacks Consensus Estimate for  Passenger Ticket as well as Onboard and other revenues is likely to move north 19.6% and 20.2%, respectively. On the earnings front, Royal Caribbean’s profitability improvement initiatives, aimed at generating long-term cost savings, are likely to have benefited the company in the second quarter.

Royal Caribbean expects to generate the major bulk of 2019 capacity from the Caribbean, with Symphony of the Seas sailing year-round from Miami and a full year of sailings on two modernized ships — Mariner of the Seas and Navigator of the Seas. Overall capacity will also increase owing to the addition of Silversea, contributing just over 2% to growth.

However, the company’s results in the quarter to be reported will be impacted by Trump administration's policy change on travel to Cuba. Notably, the travel ban to Cuba will have a huge impact on the cruise industry. In June, Royal Caribbean stated that the ban will impact the company’s 2019 earnings by 25-35 cents.

Royal Caribbean Cruises Ltd. Price and EPS Surprise

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

Royal Caribbean Cruises Ltd. price-eps-surprise | Royal Caribbean Cruises Ltd. Quote

What Does the Zacks Model Unveil?

Our proven model does not show that Royal Caribbean is likely to beat earnings in second-quarter 2019. 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. 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 -0.81% and a Zacks Rank #4.   

Stocks With Favorable Combinations

Here are a few stocks from the Consumer Discretionary sector that investors may consider as our model shows that these have the right combination of elements to post an earnings beat in the second quarter:

Marriott Vacations VAC has an Earnings ESP of +2.48% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Melco Resorts MLCO has an Earnings ESP of +27.12% and a Zacks Rank #2.

SeaWorld SEAS has an Earnings ESP of +11.01% and a Zacks Rank #3.

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Marriot Vacations Worldwide Corporation (VAC) : Free Stock Analysis Report
 
Royal Caribbean Cruises Ltd. (RCL) : Free Stock Analysis Report
 
SeaWorld Entertainment, Inc. (SEAS) : Free Stock Analysis Report
 
Melco Resorts & Entertainment Limited (MLCO) : Free Stock Analysis Report
 
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Zacks Investment Research