Leading hotelier, Hyatt Hotels Corporation (H) is set to report third quarter 2014 results on Oct 29, 2014. Last quarter, it posted a 6.82% positive surprise. Let’s see how things are shaping up for this announcement.
Factors to Consider This Quarter
Hyatt Hotels has consistently beaten the Zacks Consensus Estimate for earnings since the beginning of 2013. Given its property locations and strong brand recognition, we believe the company is well positioned to benefit from higher demand on the back of stepped-up business traveling in major North American and international locations.
The company has been benefiting from higher room rates that are boosting RevPAR. The company expects to benefit from strong transient demand and low hotel supply growth in most markets in the upcoming quarters.
Meanwhile, the company follows the asset sale strategy, which is currently weighing on its revenues to some extent. Though asset sales would provide greater financial flexibility while reducing earnings volatility and providing a more stable growth profile to the company over the long term, it would continue to hurt revenues in the near term as it did in the last quarter.
Hyatt is consistently trying to expand its presence worldwide. However, this makes the company vulnerable to fluctuation in exchange rates and uncertainty in the regions where it operates.
Particularly, a deteriorating political situation and a sluggish economy in Brazil and Chile continue to weigh on demand in these regions. Moreover, the political turmoil in Thailand, visa restrictions and concerns about the corona virus in Saudi Arabia, and Vietnam’s dispute with China also add to the woes. Egypt is in the midst of political instability while riots are affecting growth prospects in Nigeria owing to kidnappings and terrorist attacks.
Meanwhile, business in Europe is clouded by unrest in Ukraine and Russian actions in Crimea. We expect these headwinds to impact third quarter results.
Earnings Whispers?
Our proven model does not conclusively show that Hyatt Hotels is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 26 cents. Hence, the difference is 0.00%.
Zacks Rank #3 (Hold): Hyatt’s Zacks Rank #3 when combined with a 0.00% ESP makes surprise prediction difficult. Note that the Sell rated stocks (#4 and 5) should never be considered going into an earnings announcement.
Other Stocks to Consider
Other stocks in the broader consumer discretionary sector that have both a positive earnings ESP and a favorable Zacks Rank are:
The Madison Square Garden Company (MSG) with Earnings ESP of +3.13% and a Zacks Rank #3.
Pinnacle Entertainment Inc. (PNK) with Earnings ESP of +4.44% and a Zacks Rank #3.
The Walt Disney Company (DIS) with Earnings ESP of +3.41% and a Zacks Rank #2 (Buy).
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