) to beat earnings expectations when it reports fiscal
first-quarter 2014 results before the opening bell on March 25.
Why a Likely Positive Surprise?
Our proven model shows that Carnival Corporation has the right
combination of two key ingredients to beat earnings.
Positive Zacks ESP: The
for Carnival Corporation, which is the difference between the
Most Accurate estimate (loss of 6 cents) and the Zacks Consensus
Estimate (loss of 8 cents) stands at +25.00%. This indicates a
likely positive earnings surprise.
Zacks Rank: Carnival Corporation's Zacks Rank #2 (Buy) increases
the predictive power of its ESP. The combination of its Zacks
Rank and Earnings ESP makes us confident of a positive earnings
surprise in the to-be-reported quarter.
Note that stocks with Zacks Ranks of #1, 2 and 3 have a
significantly higher chance of beating earnings. The Sell-rated
stocks (#4 and 5) should never be considered going into an
Expected Earnings Drivers
We believe the Miami-based cruise line operator's turnaround
remains on track after the Costa disaster dealt a blow to its
image and profitability. In the last quarter, increased revenues
helped the company to post earnings of 4 cents per share
outpacing the Zacks Consensus Estimate of a breakeven result.
Carnival's top line has been strong for the past two quarters and
this quarter is not expected to be any different. We believe in
fiscal first quarter, revenue growth - driven by brand-building
efforts and other marketing promotions - will be the major driver
of earnings. In fact, Carnival's recent partnership with Dr.
Seuss Enterprises - a toy manufacturer based on characters from
Dr. Seuss books - to provide a variety of exciting and immersive
dining and entertainment experiences on its fleet of 24 "Fun
Ships" is expected to be beneficial to the cruise line operator.
Carnival's large scale operations allow it to exploit
opportunities for global growth faster and with superior
penetration. The company's expansion in the emerging markets of
Asia, which is developing as a major tourist destination due to
scenic islands, is also encouraging. Last year, the company
expanded in China to enhance its Princess subsidiary and is
poised to tap the increasing demand for cruises.
Even though management expects first-quarter earnings to be lower
than last year's figures, the headwinds - higher operating costs
and expensive promotional activity - appear to be temporary. We
believe the company is already taking steps to improve operating
costs, and reduction in fuel consumption is another bright spot
on Carnival's report card.
Other Stocks to Consider
Here are some other companies you may consider, as our model
shows they have the right combination of elements to post an
earnings beat this quarter:
Norwegian Cruise Line Holdings Ltd.
), Earnings ESP of +4.55% and a Zacks Rank #3 (Hold).
Las Vegas Sands Corp.
), Earnings ESP of +1.11% and a Zacks Rank #3.
), Earnings ESP of +0.81% and a Zacks Rank #3.
CARNIVAL CORP (CCL): Free Stock Analysis
LAS VEGAS SANDS (LVS): Free Stock Analysis
MCDONALDS CORP (MCD): Free Stock Analysis
NORWEGIAN CRUIS (NCLH): Free Stock Analysis
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