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Will Norwegian Cruise Line (NCLH) Q4 Earnings Disappoint?

Norwegian Cruise Line Holdings Ltd.NCLH is scheduled to report fourth-quarter 2016 results, before the market opens on Feb 22.

Over the past three months, shares of Norwegian Cruise Line returned 20.46% compared with the Zacks categorized Leisure and Recreation Services industry's growth of 8.64%.

In the third quarter of 2016, the company posted a positive earnings surprise of 1.89%. In fact, the global cruise company has a dismal record with respect to bottom-line performance. The Miami-based company missed the Zacks Consensus Estimate in three of the last four quarters, with an average earnings miss of 8.14%.

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

Factors Likely at Play this Quarter

Norwegian Cruise Line Holdings Ltd is a leading global cruise company which operates the Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises brands. With a combined fleet of 24 ships with approximately 46,500 berths, these brands offer itineraries to more than 510 destinations worldwide. The company plans to introduce four additional ships through 2020.

However, we are concerned about the company's tough operating environment, particularly in Europe, which may hamper fourth-quarter earnings. Norwegian Cruise Line has significant exposure to Europe. Consequently, weakness in this key market - due to headwinds like the surge in terror attacks - might severely affect the company's fourth-quarter earnings.

On the other hand, increase in the company's Caribbean capacity is likely to hurt results due to pricing pressure. Adverse foreign currency movements are also likely to limit growth. Moreover, competition from the likes of Carnival Corporation (CCL) and Royal Caribbean Cruises Ltd. (RCL) raise concerns.

Given the tough operating environment and the other risks discussed above, the company is quite likely to come up with tepid first-quarter and full-year 2017 results.

Earnings Whispers

Our proven model does not conclusively show that Norwegian Cruise Line is likely to beat the Zacks Consensus Estimate 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. Unfortunately, that is not the case here as elaborated below.

Zacks ESP: Norwegian Cruise Line has an earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 56 cents. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank: Norwegian Cruise Line has a Zacks Rank #3 which increases the predictive power of ESP. However, the company's 0.00% ESP makes surprise prediction difficult.

Note that 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.

Norwegian Cruise Line Holdings Ltd. Price and EPS Surprise

Norwegian Cruise Line Holdings Ltd. Price and EPS Surprise | Norwegian Cruise Line Holdings Ltd. Quote

Key Picks

Here are some companies in the Zacks-categorized broader Consumer Discretionary sector that have the right combination of elements to post an earnings beat this quarter.

Pinnacle Entertainment, Inc. PNK is expected to release fourth-quarter earnings on Feb 22, 2017. The company has an Earnings ESP of +57.14% and a Zacks Rank #3. The company's earnings surpassed the Zacks Consensus Estimate in two of the previous four quarters.

Cinemark Holdings Inc. CNK is expected to release fourth-quarter earnings on Feb 23, 2017. The company has an Earnings ESP of +2.38% and a Zacks Rank #3. You can see the complete list of today's Zacks #1 Rank stocks here .

Cinemark's earnings surpassed the Zacks Consensus Estimate in three of the previous four quarters, with an average beat of 4.29%.

Tribune Media Company TRCO is expected to release fourth-quarter earnings on Mar 1, 2017. The company has an Earnings ESP of +4.44% and a Zacks Rank #3. Tribune Media's earnings surpassed the Zacks Consensus Estimate in two of the previous four quarters.

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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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