Hyatt Hotels (H) Q2 Earnings: Disappointment In The Cards?

Hyatt Hotels Corporation (NYSE:H) is scheduled to report second-quarter 2016 results on Aug 2, before the opening bell.

Last quarter, Hyatt Hotels posted a positive earnings surprise of 4.17%. However, the company’s earnings lagged the Zacks Consensus Estimate in two of the last four quarters, with an average miss of 3.57%.

Let’s see how things are shaping up for this announcement.

Factors Likely to Influence this Quarter

Hyatt Hotels stands to gain from increased demand in the U.S. which is supported by stronger economic metrics and the increasingly positive employment scenario in the country. Moreover, improved transient demand and greater pricing power have been driving RevPAR over the past few quarters. We expect the trend to continue in the second quarter as well.

However, lingering global uncertainty in economies like Europe and Brazil is likely to limit revenue growth. Further, a slowdown in the Chinese economy is expected to be a major blow to Hyatt Hotels’ top line, as China is one of its key markets. Apart from that, the company’s business in New York continues to be affected by an oversupply of hotels.

Additionally, despite the weakening of the U.S. dollar in 2016, negative currency translation is expected to reduce the value of overseas sales, given Hyatt Hotels’ significant international presence, hurting revenues and profits in the to-be-reported quarter.

Earnings Whispers

Our proven model does not conclusively show that Hyatt Hotels is likely to beat the Zacks Consensus Estimate 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. Unfortunately, that is not the case here as elaborated below.

Zacks ESP: Hyatt Hotels has an Earnings ESP of +4.35%. This is because the Most Accurate estimate stands at 48 cents per share while the Zacks Consensus Estimate is pegged lower at 46 cents.

Zacks Rank: Hyatt Hotels has a Zacks Rank #4 (Sell). Please note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

Red Lion Hotels Corporation (NYSE:H) has an earnings ESP of +100.00% and a Zacks Rank #3.

Vista Outdoor Inc. (NYSE:VSTO) has an earnings ESP of +2.94% and a Zacks Rank #3.

Time Warner Inc. (NYSE:TWX) has an earnings ESP of +0.87% and a Zacks Rank #3.

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