What Will Hotel Stocks HLT, WYN, LQ Dish Out in Q3 Earnings?

The third-quarter reporting cycle is picking up with 116 of the S&P 500 members having already reported their quarterly numbers (as of Oct 21).

Going by the results so far, the Q3 earnings season is on track to be the first quarter to move into the positive territory after five back-to-back quarters of decline for the S&P 500 Index. In fact, the latest Earnings Preview projects a 0.1% year-over-year increase in third-quarter earnings with revenues likely to clock 1.5% growth.

Hotel Stocks in Focus

With all eyes on the Q3 earnings season, let’s take a look at how the hotel stocks are expected to fare.

The U.S. hotel industry slowed down in the first half of 2016 from the 2015 levels. Apart from a decline in occupancy levels in the first half, negative currency translation as well as pockets of geopolitical instability and economic slowdown raised concerns.

We note that the aforementioned headwinds still continue to haunt hoteliers. Yet, an increase in business and leisure travel on the back of an improving economy and positive employment numbers along with higher transaction volumes are expected to somewhat boost Q3 results.

Three hotel companies are set to report their third-quarter 2016 numbers on Oct 26. Will these companies manage to put up a decent performance? Let’s take a look at what might be in store for them this quarter:

Hilton Worldwide Holdings Inc. HLT posted a negative earnings surprise of 3.85% last quarter. However, the trailing four-quarter average earnings surprise stands at a positive 0.60%.

HILTON WW HLDG Price and EPS Surprise

 

HILTON WW HLDG Price and EPS Surprise | HILTON WW HLDG Quote

Notably, our proven model shows that an earnings beat is unlikely for Hilton in the third quarter. This is because, according to our quantitative model, a company needs the right combination of the two key ingredients – a positive Earnings ESP and a Zacks Rank #3 (Hold) or better – to increase its odds of an earnings surprise. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

For the quarter, the company has an Earnings ESP of 0.00% and a Zacks Rank #4 (Sell). Notably, the Zacks Consensus Estimate for the quarter’s earnings is pegged at 23 cents.

The company saw strong system-wide revenue per available room (RevPAR) in second-quarter 2016 and we expect the trend to continue in the to-be-reported quarter. However, lingering political uncertainty and economic downturns in international markets along with unfavorable currency translations might limit top-line growth (read more: Hilton to Report Q3 Earnings: Disappointment in Store?).

Wyndham Worldwide Corporation WYN recorded a positive earnings surprise of 2.94% in the preceding quarter. In fact, the company posted positive earnings surprises in three of the past four quarters, with an average beat of 1.89%.

WYNDHAM WORLDWD Price and EPS Surprise

 

WYNDHAM WORLDWD Price and EPS Surprise | WYNDHAM WORLDWD Quote

The company has an Earnings ESP of 0.00%, which makes surprise prediction difficult even though the company has a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for the quarter’s bottom line is pegged at $1.87. Wyndham’s strong developmental pipeline, consistent expansion plans, significant international exposure and robust marketing efforts should drive the quarter’s earnings. However, negative currency translation and uncertainty in international markets could dampen its revenues (read more: Is a Surprise in Store for Wyndham in Q3 Earnings?).

La Quinta Holdings Inc. LQ registered a 5.00% positive earnings surprise in the previous quarter. Moreover, the company outpaced/met the Zacks Consensus Estimate in three of the past four quarters, with an average beat of 3.13%.

LA QUINTA HLDGS Price and EPS Surprise

 

LA QUINTA HLDGS Price and EPS Surprise | LA QUINTA HLDGS Quote

The company has an Earnings ESP of 0.00%, which when combined with a Zacks Rank #4, makes surprise prediction difficult. Meanwhile, the Zacks Consensus Estimate for the quarter’s bottom line is pegged at 19 cents.

Don’t miss out on our full earnings release articles for these stocks, as the actual results might hold some surprises!

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WYNDHAM WORLDWD (WYN): Free Stock Analysis Report
 
LA QUINTA HLDGS (LQ): Free Stock Analysis Report
 
HILTON WW HLDG (HLT): Free Stock Analysis Report
 
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