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Will Hurricanes Mar Norwegian Cruise's (NCLH) Q3 Earnings?

Norwegian Cruise Line Holdings Ltd. NCLH is scheduled to release third-quarter 2017 results on Nov 9, before the market opens.

Last quarter, the company delivered a positive earnings surprise of 5.2%. Also, Norwegian Cruise Line’ssecond-quarter 2017 adjusted earnings of $1.02 per share surpassed the Zacks Consensus Estimate of 97 cents. The bottom line improved substantially on a year-over-year basis.

Revenues came in at $1,344 million, beating the Zacks Consensus Estimate of $1,309 million. Also, the top line increased 13.2% from the year-ago figure.

However, this Miami-based company is likely to face turbulence in the quarter. Evidently, multiple headwinds including the back-to-back hurricanes have hurt travel-focused stocks including cruise line companies. 

In fact, the negative sentiment surrounding the stock can be gauged from the fact that the Zacks Consensus Estimate for third-quarter earnings has moved down 2.7% over the last 90 days.

Also, the stock has struggled of late underperforming the Zacks Leisure and Recreation Services industry over the last six months. Shares of Norwegian Cruise Line have declined 0.2%, as against the industry’s rally of 4.9%.

Lets delve deep to find out the factors likely to impact Norwegian Cruise Line’s third-quarter results.

Norwegian Cruise Line like its fellow cruise line operators — Royal Caribbean Cruises Ltd RCL and Carnival Corp CCL — had to call off voyages and re-route ships to avoid stops at islands affected by the hurricanes. In fact, hurricane Irma forced Norwegian Cruise Line to bring back two of its Miami-based ships. The cancellations/ rerouting are likely to adversely impact the company’s top line in the to-be-reported quarter.

Despite the headwinds, the company is expected to benefit from robust marketing initiatives and impressive booking environment. The Zacks Consensus Estimate for third-quarter passenger ticket revenues is pegged at $1,188 million, higher than $938 million reported in the second quarter of 2017.

Notably, Norwegian Cruise Line was recently included in the S&P 500 Index. It expects earnings per share (excluding special items) of approximately $1.83 in the third quarter of 2017. Fuel price per metric ton, net of hedges, is projected at $455. Also, we expect the companyto provide a subdued fourth-quarter guidance due to hurricanes.

What Does Our Model Say

Our proven model does not show conclusively that Norwegian Cruise Linewill beat earnings in the third 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. However, that is not the case as highlighted below.

Zacks Rank: Norwegian Cruise Line carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Zacks ESP: Norwegian Cruise Line has an Earnings ESP of -1.02% as the Most Accurate estimate of 2 cents is pegged below the Zacks Consensus Estimate of $1.82 per share. The negative Earnings ESP combined with the Zacks Rank leaves the surprise prediction inconclusive. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Note that we caution against stocks with Zacks Ranks #4 or 5 (Sell rated) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

A Stock to Consider

With Norwegian Cruise Line likely to disappoint, investors interested in the broader Consumer Discretionary space may consider Marriott International MAR as our model shows that this company possesses the right combination of elements to post an earnings beat in its upcoming release.

Marriott International has an Earnings ESP of +0.20% and a Zacks Rank #2. The company will report third-quarter results on Nov 7.

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Marriott International (MAR): Free Stock Analysis Report
Carnival Corporation (CCL): Free Stock Analysis Report
Royal Caribbean Cruises Ltd. (RCL): Free Stock Analysis Report
Norwegian Cruise Line Holdings Ltd. (NCLH): Free Stock Analysis Report
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