Leading hotelier Hyatt Hotels Corporation H is set to report first quarter 2015 results on May 5, 2015, before the market opens. Last quarter, the company posted a positive earnings surprise of 40.9%. Let’s see how things are shaping up for this announcement.
Factors to Consider
Hyatt is progressing well backed by a strong expansion plan, significant international exposure, portfolio restructuring and an increase in RevPAR across segments. Driven by improved group demand and greater pricing power, the company is witnessing strong RevPAR.
Moreover, with a low supply growth environment and continued increase in demand, the company will be able to raise its room rates, going forward. Given its property locations and strong brand recognition, we believe the company is well positioned to benefit from higher demand in the upcoming quarters.
However, besides expanding in the domestic market, Hyatt continues to expand its presence worldwide, which makes it vulnerable to lingering political uncertainty, sluggish economy and other such issues in the regions like Seoul, Paris, and Bishkek where it operates. The company expects weak performance in Paris and Bishkek to continue to negatively impact margins in 2015 due to the opening of new hotels and a significant decline in demand, respectively.
Meanwhile, currency headwinds also remain. A stronger U.S. dollar reduces the value of overseas sales when they are converted to U.S. currency. These factors would hurt revenues and profits of the company in the soon-to-be reported quarter.
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 #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: The Earnings ESP for Hyatt Hotels stands at 0.00%. This is because both the Most Accurate Estimate and Zacks Consensus Estimate stand at 18 cents.
Zacks Rank: Hyatt Hotels’ Zacks Rank #2 (Buy) increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.
Note that the Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.
Other Stocks to Consider
Stocks in the hotel industry as well as the broader consumer discretionary sector that have both a positive earnings ESP and a favorable Zacks Rank include:
Intrawest Resorts Holdings, Inc. SNOW with an Earnings ESP of +2.17% and a Zacks Rank #2.
Isle of Capri Casinos, Inc. ISLE with an Earnings ESP of +2.44% and a Zacks Rank #1 (Strong Buy).
Skullcandy, Inc. SKUL with an Earnings ESP of +7.69% and a Zacks Rank #1.
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