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Can Royal Caribbean (RCL) Pull Off a Surprise in Q2 Earnings?

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Global cruise vacation company Royal Caribbean Cruises Ltd. (RCL - Free Report) is scheduled to report second-quarter 2017 numbers on Aug 1, before the opening bell.

Last quarter, Royal Caribbean pulled off positive earnings surprise of 7.61%. In fact, the company’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, with an average beat of 4.63%.

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

Factors Likely to Affect Q2 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, ship and 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 and European products along with its Asia-Pacific itineraries are likely to deliver strong results in the to-be-reported quarter. Meanwhile, increased investments in the Chinese cruise market are likely to further bolster the quarter’s results.

However, lingering global uncertainties in key operating regions 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 an earnings beat for Royal Caribbean 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 $1.67. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Royal Caribbean carries a Zacks Rank #3, 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:

Norwegian Cruise Line Holdings Ltd. (NCLH - Free Report) has an Earnings ESP of +1.03% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Time Warner Inc. has an Earnings ESP of +1.68% and a Zacks Rank #2.

SeaWorld Entertainment, Inc. (SEAS - Free Report) has an Earnings ESP of +5.88% and a Zacks Rank #3.

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