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Solid Booking to Aid Royal Caribbean (RCL) in Q1 Earnings

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Royal Caribbean Cruises Ltd. (RCL - Free Report) is expected to have seen top and bottom-line growth in the first quarter of 2019, given solid booking trends and efficient cost-cutting initiatives.

The fourth quarter of 2018 marked Royal Caribbean’s 16th straight quarter of earnings beat. Backed by an impressive earnings trend, shares of the company have gained 1% in the past year against the industry’s collective decline of 3.8%.

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


 

Bookings & Capacity Growth to Aid Revenues

In 2018, demand for Royal Caribbean’s all brands and itineraries increased sharply. Per the company, this trend is likely to have continued in the first quarter of 2019 as well. Management noted that the Wave Season has seen a solid start and overall booking in the first is likely to exceed that of the prior-year quarter’s mark. On the supply front, the company is steadfast in increasing capacity to match the rising demand.

The Zacks Consensus Estimate for revenues in the first quarter of 2019 is pegged at $2.4 billion, suggesting a 17.2% increase from the year-ago quarter’s reported figure. The projected increase in revenues is in line with the company’s trend of recording incremental revenues throughout 2018.

In 2018, Royal Caribbean witnessed revenue growth of 8.2% year over year, driven by higher passenger ticket as well as onboard and other revenues. We believe that passenger ticket revenues, and onboard and other revenues have increased in the first quarter.

Subsequently, the Zacks Consensus Estimate predicts first-quarter passenger ticket revenues to increase 16.9% from the year-ago quarter’s reported figure. Also, estimates suggest that onboard and other revenues will increase 17.4% year over year in the first quarter of 2019.

Profitability Initiatives to Drive Earnings

Royal Caribbean’s profitability improvement initiatives, aimed at generating long-term cost savings, are likely to have boosted earnings in the first quarter of 2019. In 2018, adjusted earnings per share were $8.86, reflecting a 17.5% year-over-year growth. We believe that the trend is likely to have continued in the first quarter.

The company predicted first-quarter earnings of $1.10 per share while the Zacks Consensus Estimate is pegged at $1.11, suggesting a 1.8% growth from the year-ago quarter’s earnings of $1.09 per share.

What Does Our Model Suggest?

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 or 5 (Sell-rated) 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 -0.90% and a Zacks Rank #3, a combination that does not suggest that it is likely to beat estimates.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Royal Caribbean Cruises Ltd. Price and EPS Surprise

 

Stocks With Favorable Combinations

Here are a few stocks from the Consumer Discretionary sector that investors may consider as our model shows that these have the right combination of elements to post an earnings beat in the first quarter:

JAKKS Pacific (JAKK - Free Report) has an Earnings ESP of +17.86% and it currently carries a Zacks Rank #2.

Wynn Resorts (WYNN - Free Report) has an Earnings ESP of +1.78% and a Zacks Rank #3 at present.

Marriott (MAR - Free Report) currently has an Earnings ESP of +0.90% and a Zacks Rank #3.

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