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Royal Caribbean (RCL) Q2 Earnings: Ticket Revenues Hold Key

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Royal Caribbean Cruises Ltd. (RCL - Free Report) is scheduled to report second-quarter 2018 financial numbers on Aug 2, before the opening bell.

In the last reported quarter, the company pulled off a positive earnings surprise of 13.5%. Also, Royal Caribbean’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with an average beat of 7.3%.

What to Expect?

The question lingering on investors’ minds is whether Royal Caribbean will be able to deliver a positive earnings surprise in the quarter to be reported as well. The Zacks Consensus Estimate for second-quarter earnings is pegged at $1.97, which is higher than $1.71 in the year-ago quarter. Over the past seven days, the company’s earnings estimates have witnessed an upward revision of 4 cents. In first-quarter 2018, the company’s bottom line increased 10.1% on a year-over-year basis. The Zacks Consensus Estimate for revenues stands $2,331 million, up 6.2% from the prior-year actual figure.

Let’s delve deeper to find out how this global cruise vacation company’s top and bottom line will shape up in the to-be-reported quarter.

Factors at Play

Higher passenger ticket revenues as well as onboard and other revenues, which drove Royal Caribbean’s first-quarter 2018 results, are likely to be major growth drivers in the soon-to-be-reported quarter too. The Zacks Consensus Estimate for passenger ticket revenues indicates 5.7% year-over-year increase to $1,671 million. Moreover, the consensus mark for the onboard and other revenues is pegged at $661 million, up 7.7% on a year-over-year basis. In the last reported quarter, passenger ticket revenues inched up 0.5% to $1,425.6 million, and onboard and other revenues increased 2% to $602.1 million.

Meanwhile, the company’s sailings in the United States, Europe, Alaska, Baltic and Asia are likely to continue performing well. While, its capacity growth should aid in meeting the increased demand, ship innovation and technology investments may lead to higher yields. Asia-Pacific itineraries accounting for 17% of 2018 capacity had a particularly strong first quarter, with robust yield growth in Australia, China and Southeast Asia. Notably, these itineraries are in a good book position for the current year.

Also, revenues growth along with costs saving initiatives will continue boosting Royal Caribbean’s bottom line. In first-quarter 2018, net cruise costs (NCC), excluding fuel, grew 11.2% on a constant-currency basis. The metric is likely to increase by nearly 5% in the quarter to be reported. However, analysts expect NCC to come in below the guidance of 5% increase, courtesy of the company’s cost saving initiatives.

Royal Caribbean Cruises Ltd. Price, Consensus and EPS Surprise

Our Model Suggests a Beat

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. Zacks Rank #4 (Sell) or 5 (Strong Sell) stocks are best avoided, especially if they have a negative Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Royal Caribbean has an Earnings ESP of +4.67% and a Zacks Rank #3, a combination that suggests that the company is likely to beat estimates.

Stocks to Consider

Here are some stocks that you may also want to consider as our model shows these too have the right combination of elements to deliver a positive earnings surprise:

Clarus Corporation (CLAR - Free Report) has an Earnings ESP of +100.00% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Acushnet Holdings Corp. (GOLF - Free Report) has an Earnings ESP of +3.25% and a Zacks Rank of 3.

Callaway Golf Company (ELY - Free Report) has an Earnings ESP of +0.94% and a Zacks Rank #3.

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