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What Should You Expect from Carnival (CCL) in Q3 Earnings?

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Cruise and vacation company, Carnival Corporation (CCL - Free Report) , is expected to release third-quarter fiscal 2017 results on Sep 25, before market opens.

Last quarter, the company delivered a positive earnings surprise of 10.64%. In fact, the company’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, with an average beat of 9.08%.

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

Carnival Corporation Price and EPS Surprise

Factors Likely to Affect Q3 Results

During the second-quarter fiscal 2017 earnings conference call, the company had issued a guidance of $2.16-$2.20 adjusted earnings per share for the fiscal third quarter. Carnival had factored in year-over-year growth in net revenue yields (constant dollars) of roughly 4% and a flat year-over-year net cruise costs, excluding fuel, while projecting its earnings per share.

We are positive on Carnival’s strategy to grow beyond its familiar itineraries and capitalize on new markets. In fact, the company is confident about its fiscal third-quarter results to reflect growth in China and other Asian markets as well as expansion in relatively other untapped markets like Cuba, Bermuda and Mexico.

Notably, last year, the company had launched the initial phase of its yield management system, which is expected to aid in driving incremental revenue yields in the to-be-reported quarter. In addition, Carnival predicts the quarter’s revenue yields to improve on the back of marketing initiatives, enhancement of guest experiences and a better booking environment.

Moreover, the company remains focused on its cost-containment efforts, including decreased fuel consumption that is likely to aid the quarter’s margins.

However, higher investment in marketing increased marketing expenses might hamper the quarter’s margins. Higher fuel costs and adverse foreign exchange movements may also weigh on the company’s profits. Meanwhile, macroeconomic issues in key operating regions remain concerns for the company’s top line.

Earnings Whispers

Our proven model does not conclusively show earnings beat for Carnival 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: Carnival has an Earnings ESP of -0.31%. This is because the Most Accurate estimate is $2.19, while the Zacks Consensus Estimate is pegged higher at $2.20. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Carnival has a Zacks Rank #2, which increases the predictive power of ESP. However, the company’s negative 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:

Marriott Vacations Worldwide Corporation (VAC - Free Report) has an Earnings ESP of +2.61% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

V.F. Corporation (VFC - Free Report) has an Earnings ESP of +0.52% and a Zacks Rank #2.

Interface, Inc. (TILE - Free Report) has an Earnings ESP of +1.69% and a Zacks Rank #3.

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