Is Carnival Corp (CCL) Likely to Disappoint in Q4 Earnings?

Cruise and vacation company Carnival CorporationCCL is slated to release fourth-quarter and fiscal 2016 results on Dec 20, before the market opens.

Last quarter, Carnival posted a positive earnings surprise of 1.59%. In fact, the company's earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, with an average beat of 18.75%.

Let's see how things are shaping up for this announcement.

Factors to Consider

Along with the fiscal third-quarter report, Carnival issued a guidance range of 55 cents to 59 cents for adjusted earnings per share in the fiscal fourth quarter. The company had factored in year-over-year rise in net revenue yields in constant currency of roughly 3% and a 1% increase in net cruise costs excluding fuel per available lower berth day (ALBD), on a constant currency basis, in its projection.

Meanwhile, for fiscal 2016, the company expects earnings in the range of $3.33 to $3.37. Based on the booking trends that time, it continued to expect fiscal 2016 net revenue yields in constant currency to be up approximately 3.5%. Also, the company expected net cruise costs, excluding fuel per ALBD, on a constant currency basis, for the fiscal year to be up nearly 1.5%.

Moreover, in the fiscal third quarter, the company launched the initial phase of its yield management system, which will aid in driving incremental revenue yields over time. Carnival also expects revenue yields to continue improving on the back of marketing initiatives and a better booking environment. Besides, its brand-strengthening initiatives via documentaries, television programs and other digital initiatives are likely to have boosted the revenue stream.

Carnival's strategy to grow beyond its familiar itineraries and capitalize on new markets bodes well. The company is also confident that its fiscal fourth-quarter results will reflect growth in the Asian and Australian markets and expansion to other relatively untapped markets.

However, negative currency translation as well as increased marketing expenses may hamper the quarter's performance. Most firms expect a likely increase in fuel costs to weigh on the company's profits. Meanwhile the Chinese slowdown is likely to affect the company's top line.

CARNIVAL CORP Price and EPS Surprise


Earnings Whispers

Our proven model does not conclusively show that Carnival is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks ESP: Carnival has an Earnings ESP is -1.72%, as the Most Accurate estimate stands at 57 cents while the Zacks Consensus Estimate is pegged at 58 cents.

Zacks Rank: Carnival has a Zacks Rank #4 (Sell).

As it is we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies in the broader consumer discretionary sector to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

Royal Caribbean Cruises, Ltd. RCL has an Earnings ESP of +2.46% and a Zacks Rank #3. You can see the complete list of today's Zacks #1 Rank stocks here .

Caleres, Inc. CAL has an Earnings ESP of +5.13% and a Zacks Rank #2.

Boyd Gaming Corporation BYD has an Earnings ESP of +12% and a Zacks Rank #3.

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CALERES INC (CAL): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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