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Key Predictions for Q4 Earnings Reports of LVS and RCL

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As the Q4 earnings season is ramping up, multiple reports will be flowing in this week. So far, the earnings picture looks encouraging. Per the Earnings Outlook  as of Jan 19, out of the 53 S&P 500 members that have posted their quarterly results so far, 81.1% surpassed earnings estimates, 75.5% beat revenues and 62.3% outpaced both earnings and sales.

Further, total earnings for these companies have increased 11.7% from the same period last year on 7.5% higher revenues. The report projects a 10.3% year-over-year rise in earnings for the S&P 500 companies with total revenues likely to increase 7.1%.

A Mixed Bag for Consumer Discretionary

While a few sectors are expected to put up a stellar show in Q4 earnings, the widely diversified Consumer Discretionary sector is likely to post mixed results.

Total earnings for the sector are likely to decline 2.4% year over year. Earnings in the last reported quarter grew 0.9% year over year. Total revenues are projected to grow 3.5% year over year in Q4, remaining flat with the prior quarter growth.

Gaming Industry to See Growth

The Gaming Industry, under Consumer Discretionary, has performed remarkably well in the past year. The industry has gained 39.4%, outpacing the S&P 500’s 26.3%.

We expect the industry to have grown in the fourth quarter on increasing demand for gaming services and rapid expansion of these service providers.

Reflecting the bullishness, casino giant Wynn Resorts (WYNN - Free Report) posted better-than-expected results for fourth-quarter 2017, with earnings and revenues beating the Zacks Consensus Estimate.

Moving on,Las Vegas Sands Corp. (LVS - Free Report) is slated to release fourth-quarter 2017 numbers on Jan 24, after market close. Given the ongoing recovery in gaming revenues in Macao and continued improvement in the Las Vegas business, the stock is expected to perform well in the quarter.

The Zacks Consensus Estimate for earnings is pegged at 77 cents, reflecting a year-over-year increase of 24.2%. It is attributable to the company’s continuous improvement in margins which is driving earnings. While some companies in the leisure industry are grappling with margin pressure, Las Vegas Sands’ EBITDA margins have been consistently improving on continued focus on mass and non-gaming segments that carry higher margins.

Meanwhile, analysts polled by Zacks expect revenues of $3,205 million, up from $3,075 million reported in the prior-year quarter. The consensus estimate also portrays sequential growth of 0.2% on the company’s solid business model, extensive non-gaming revenue opportunities, high quality assets and attractive property locations. Additionally, a few planned entertainment offerings in the pipeline are expected to deliver profitable results across the company’s properties in the fourth quarter. (Read More: Is Las Vegas Sands Poised for a Beat in Q4 Earnings?)

Las Vegas Sands carries a Zacks Rank #2 (Buy) and an Earnings ESP of +3.45%, a combination that increases the odds of a beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Las Vegas Sands Corp. Price and EPS Surprise

 

 

Leisure and Recreation Services Well Positioned

The Leisure and Recreation Services Industry is also a well-performing space within Consumer Discretionary. The industry has rallied 27.5% in the past year, outpacing the S&P 500’s 26.3% growth.

Increased consumer spending on leisure stocks is expected to favor the industry’s results.

As it is, Carnival Corporation (CCL - Free Report) , being the most prominent of all cruise stocks within the industry, has reported better-than-expected results in fourth-quarter fiscal 2017. Both earnings and revenue surpassed the consensus mark.

Another prominent cruise stock, Royal Caribbean Cruises Ltd. (RCL - Free Report) is scheduled to report fourth-quarter 2017 numbers on Jan 24, before the bell.

Royal Caribbean’s top line is expected to be significantly driven by solid onboard revenues, strong performance of joint ventures and a decent book position. Subsequently, the consensus estimate for revenues is pegged at $1.98 million, reflecting a year-over-year increase of 3.4%.

The consensus estimate for EPS stands at $1.20, reflecting a year-over-year decrease of 2.4% owing to rising costs. Royal Caribbean expects net cruise costs, excluding fuel, to be up roughly 8.5%. Planned investments and revenue generating activities will further drive costs. (Read More: What to Expect From Royal Caribbean in Q4 Earnings?)

Royal Caribbean has a Zacks Rank #3 (Hold) and an Earnings ESP of +0.57%, a combination that suggests that the company will likely beat estimates. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Royal Caribbean Cruises Ltd. Price and EPS Surprise

 

 

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