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Is a Beat Likely for Norwegian Cruise (NCLH) in Q2 Earnings?

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Norwegian Cruise Line Holdings Ltd. (NCLH - Free Report) is slated to release second-quarter 2017 results on Aug 8, before the market opens.

Last quarter, the company delivered a positive earnings surprise of 8.11%. The company’s first-quarter 2017 adjusted earnings of 40 cents per share beat the Zacks Consensus Estimate of 37 cents. Earnings improved substantially on a year-over-year basis. Revenues came in at $1150.8 million, beating the Zacks Consensus Estimate of $1139.5 million. Revenues also climbed 6.8% from the year-ago figure.

Why a Likely Positive Surprise?

Our proven model shows that the company is likely to beat on earnings this quarter as well. Note that stocks with a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) have significantly higher chances of predicting an earnings beat.

Zacks ESP: The Earnings ESP for Norwegian Cruise is +1.03% with the Most Accurate estimate exceeding the Zacks Consensus Estimate of 97 cents per share by a penny. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Norwegian Cruise carries a Zacks Rank #2, which increases the predictive power of ESP and its positive ESP, further makes us confident about an earnings surprise.

We caution against all Sell-rated stocks (#4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

What’s Driving the Better-than-Expected Earnings?

Norwegian Cruise is expected to perform well in this quarter owing to an increased travel demand. The company’s expansion efforts to combat this demand also raise optimism. In May, the company announced a partnership with Alibaba Group to extend into the Chinese cruise market. In fact, the company entered Shanghai, Chinain June, with the introduction of Norwegian Joy (cruise ship designed for Chinese travelers).

The company’s focus on strengthening its balance sheet by deleveraging is also appreciative. In May, the company’s board announced an extension of its three-year repurchase program of shares worth $500 million, originally scheduled to expire on April 29, 2017through April 29, 2020.

The company expects adjusted EPS of 95 cents in the second quarter of 2017.

Other Stocks to Consider

Per our model, here are some other stocks worth considering from the broader Consumer Discretionary space with the right combination of elements to come up with an earnings beat in their respective quarters:

AMC Networks Inc. (AMCX - Free Report) has an Earnings ESP of +1.42% and a Zacks Rank #3. The company will report second-quarter earnings on Aug 3.

Coach, Inc. (COH - Free Report) has an Earnings ESP of +2.08% and a Zacks Rank #3. The company will report fourth-quarter fiscal 2017 results on Aug 15.

Camping World Holdings Inc. (CWH - Free Report) has an Earnings ESP of +5.80% and a Zacks Rank #3. The company will report second-quarter earnings on Aug 10. You can see the complete list of today’s Zacks #1 Rank stocks here.

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