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Hyatt's (H) Q1 Earnings to Suffer Despite Unit Expansion

Zacks Equity Research

Hyatt Hotels Corporation H is scheduled to report first-quarter 2019 numbers on May 1, after the market closes. In the last reported quarter, the company’s earnings surpassed the Zacks Consensus Estimate by 181.8%. Also, it delivered average four-quarter positive earnings surprise of 69.4%.

What to Expect?

The Zacks Consensus Estimate for first-quarter earnings is pegged at 21 cents, indicating a 36.4.4% decline from the prior-year quarter’s reported figure. Over the past 30 days, the company’s earnings have witnessed downward revisions, reflecting analysts’ concern surrounding the stock. For revenues, the consensus mark stands at nearly $1.14 billion, mirroring a 2.9% increase from the year-ago quarter number.

Let’s take a look at how the company’s top and bottom line will shape up in the to-be-reported quarter.

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Factors at Play

Hyatt’s presumed top-line growth in the first quarter of 2019 can be attributable to the company’s continual unit growth. Hyatt is strongly invested in strategies related to various acquisitions and divestitures that can drive growth for the company. It is leaving no stone unturned to fortify its presence worldwide. In the first quarter of 2019, the company expanded presence, targeting robust unit growth.

Meanwhile, despite having witnessing declining sales in the owned and leased hotel segment, Hyatt’s loyalty program, World of Hyatt, has been attracting more customers, thereby fortifying the overall top line.

This apart, the company has a strategy of asset sales that will strengthen its management and licensing arrangements instead of direct ownership of selective assets. Also, its asset sales are outnumbering asset possessions through new mergers. While this may increase the company’s franchise fees and reduce earnings volatility in the long run, results in the first quarter are likely to have been affected.

What Does the Zacks Model Unveil?

Our proven model does show that Hyatt is likely to beat earnings estimates 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. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Hyatt has an Earnings ESP of +5.32% and a Zacks Rank #3, which make surprise prediction easier.

Conversely, 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.

Hyatt Hotels Corporation Price and EPS Surprise

 

Hyatt Hotels Corporation Price and EPS Surprise | Hyatt Hotels Corporation Quote

Other Stocks With Favorable Combinations

Here are a few other stocks from the Consumer Discretionary sector that investors may consider as our model shows that these too have the right combination of elements to post an earnings beat in the first quarter:

JAKKS Pacific JAKK has an Earnings ESP of +17.86% and it currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Wynn Resorts WYNN has an Earnings ESP of +2.98% and a Zacks Rank #3 at present.

Norwegian Cruise NCLH currently has an Earnings ESP of +0.53% and a Zacks Rank #3.

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Wynn Resorts, Limited (WYNN) : Free Stock Analysis Report
 
Hyatt Hotels Corporation (H) : Free Stock Analysis Report
 
Norwegian Cruise Line Holdings Ltd. (NCLH) : Free Stock Analysis Report
 
JAKKS Pacific, Inc. (JAKK) : Free Stock Analysis Report
 
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