) is set to report second-quarter 2014 results on Jun 24, 2014,
before the opening bell.
In the last quarter, it posted a positive earnings surprise of
100.0%, driven by better-than-expected top line. Let's see how
things are shaping up for the upcoming announcement.
Factors to Consider this Quarter
We believe the cruise line operator's turnaround remains on track
after the 2012 Costa disaster dealt a blow to its image and
profitability. In the last quarter, better-than-expected revenues
helped the company to post breakeven earnings, better than the
Zacks Consensus Estimate of a loss of 8 cents.
Carnival has delivered strong top-line numbers for the past two
quarters. Even though management expects second-quarter revenues to
be lower than last year, it is expected to improve in the second
half of the year driven by better booking environment, higher
ticket pricing and the brand-building efforts and other marketing
In fact, Carnival's partnership with Dr. Seuss Enterprises ( which
started in April, this year) - a toy manufacturer based on
characters from Dr. Seuss books - to provide exciting and immersive
dining and entertainment experiences on its fleet of 24 "Fun Ships"
is expected to be beneficial.
Carnival's large scale operations allow it to exploit global growth
opportunities faster. The company's expansion in the emerging
markets of Asia, which is gaining popularity as a tourist
destination, is also encouraging. In May, the company announced
that it was redirecting a European liner to Shanghai to capitalize
on the growing Chinese cruise market.
In the same month, the company announced its intention to add two
more ships to its Australian brand P&O Cruises (Australia) in
Nov 2015. In our view, the Asia Pacific region is an attractive bet
for Carnival because of the stable economy and growing affluent
However, the company is facing some headwinds like higher operating
costs and expensive promotional activity. Although the company is
already taking steps to improve operating costs and reduce fuel
consumption, higher fuel cost is expected to be a drag on the
second-quarter earnings. Additionally, costs related to Carnival's
plans to reduce pollution generated by its ships will add to the
Our proven model does not conclusively show that the company is
likely to beat earnings this quarter. That is because a stock needs
to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3
for this to happen. That is not the case here, as you will see
Zacks ESP: The Earnings ESP for Carnival is 0.00%. This is because
both the Most Accurate estimate and the Zacks Consensus Estimate
are pegged at 2 cents.
Zacks Rank: Carnival has a Zacks Rank #3 (Hold) which when combined
with a 0.00% ESP makes surprise prediction difficult.
We caution against stocks with Zacks Rank #4 and 5 (Sell-rated
stocks) going into the earnings announcement, especially when the
company is seeing negative estimate revisions momentum.
Other Stocks to Consider
Here are some other companies that investors may consider, as our
model shows that they have the right combination of elements to
post an earnings beat this quarter:
MGM Resorts International
), with an Earnings ESP of +27.27% and a Zacks Rank #2 (Buy).
Regal Entertainment Group
), with an Earnings ESP of +15.15% and a Zacks Rank #2.
Bally Technologies, Inc.
), with an Earnings ESP of +0.81% and a Zacks Rank #3.
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CARNIVAL CORP (CCL): Free Stock Analysis Report
BALLY TECH INC (BYI): Free Stock Analysis
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REGAL ENTMNT GP (RGC): Free Stock Analysis
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