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Florida-based cruiser Carnival Corporation (CCL - Analyst Report) is set to report second-quarter 2014 results on Jun 24, 2014, before the opening bell.

In the last quarter, it posted a positive earnings surprise of 100.0%, driven by better-than-expected top line. Let’s see how things are shaping up for the upcoming announcement.

Factors to Consider this Quarter

We believe the cruise line operator’s turnaround remains on track after the 2012 Costa disaster dealt a blow to its image and profitability. In the last quarter, better-than-expected revenues helped the company to post breakeven earnings, better than the Zacks Consensus Estimate of a loss of 8 cents.

Carnival has delivered strong top-line numbers for the past two quarters. Even though management expects second-quarter revenues to be lower than last year, it is expected to improve in the second half of the year driven by better booking environment, higher ticket pricing and the brand-building efforts and other marketing promotions

In fact, Carnival’s partnership with Dr. Seuss Enterprises ( which started in April, this year) — a toy manufacturer based on characters from Dr. Seuss books — to provide exciting and immersive dining and entertainment experiences on its fleet of 24 "Fun Ships” is expected to be beneficial.

Carnival's large scale operations allow it to exploit global growth opportunities faster. The company’s expansion in the emerging markets of Asia, which is gaining popularity as a tourist destination, is also encouraging. In May, the company announced that it was redirecting a European liner to Shanghai to capitalize on the growing Chinese cruise market.

In the same month, the company announced its intention to add two more ships to its Australian brand P&O Cruises (Australia) in Nov 2015. In our view, the Asia Pacific region is an attractive bet for Carnival because of the stable economy and growing affluent middle-class.

However, the company is facing some headwinds like higher operating costs and expensive promotional activity. Although the company is already taking steps to improve operating costs and reduce fuel consumption, higher fuel cost is expected to be a drag on the second-quarter earnings. Additionally, costs related to Carnival’s plans to reduce pollution generated by its ships will add to the escalating expenses.

Earnings Whisper?

Our proven model does not conclusively show that the company is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here, as you will see below.

Zacks ESP: The Earnings ESP for Carnival is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 2 cents.

Zacks Rank: Carnival has a Zacks Rank #3 (Hold) which when combined with a 0.00% ESP makes surprise prediction difficult.

We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

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

MGM Resorts International (MGM - Analyst Report), with an Earnings ESP of +27.27% and a Zacks Rank #2 (Buy).

Regal Entertainment Group (RGC - Snapshot Report), with an Earnings ESP of +15.15% and a Zacks Rank #2.

Bally Technologies, Inc. (BYI - Snapshot Report), with an Earnings ESP of +0.81% and a Zacks Rank #3.
 

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