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Royal Caribbean (RCL) Q2 Earnings: What's in the Cards?

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Royal Caribbean Cruises Ltd. (RCL - Free Report) is scheduled to report second-quarter 2016 numbers on Aug 2, before the opening bell.

Last quarter, Royal Caribbean posted a 78.13% positive earnings surprise. In fact, the company’s earnings surpassed the Zacks Consensus Estimate in all of the last four quarters, with an average beat of 25.54%.

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

ROYAL CARIBBEAN Price and EPS Surprise

ROYAL CARIBBEAN Price and EPS Surprise | ROYAL CARIBBEAN Quote

Factors Likely to Influence this Quarter

Given the strength and diversity of its brands and itineraries, the cruise operator has successfully captured the potential and repeat cruise vacationers. Moreover, strong booking and demand trends, especially for North America, Caribbean, Alaska and Bermuda sailings, should boost revenues in the to-be-reported quarter. Also, various technological innovations and profitability initiatives undertaken by the company are expected to boost the quarter’s results.

However, higher marketing and promotional spend along with increased cruise costs might hurt the quarter’s margins. Notably, the company expects expenses to scale higher in the second quarter mainly due to the delay in renovation of the Empress of the Seas. Moreover, lingering global uncertainty in economies like Europe and China is likely to limit revenue growth. Additionally, despite the weakening of the U.S. dollar, negative currency translation is expected to hurt profits in the to-be-reported quarter.

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 -0.97%. This is because the Most Accurate estimate stands at $1.02 per share while the Zacks Consensus Estimate is pegged higher at $1.03.

Zacks Rank: Royal Caribbean has a Zacks Rank #3 which increases the predictive power of ESP. However, the company’s negative ESP makes surprise prediction difficult.

Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) 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:

Red Lion Hotels Corporation has an earnings ESP of +100.00% and a Zacks Rank #3.

Vista Outdoor Inc. (VSTO - Free Report) has an earnings ESP of +2.94% and a Zacks Rank #3.

Wynn Resorts Ltd. (WYNN - Free Report) has an earnings ESP of +1.03% and a Zacks Rank #3.

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