Will Soft Owned & Leased Segment Mar Hyatt's (H) Q4 Earnings?

Hyatt Hotels Corporation (NYSE:H) is scheduled to report fourth-quarter 2018 numbers on Feb 13, after market close. In the last reported quarter, the company’s earnings surpassed the Zacks Consensus Estimate by 32%. Also, it delivered average four-quarter positive earnings surprise of 29.2%.

What to Expect?

The Zacks Consensus Estimate for fourth-quarter earnings is pegged at 22 cents, indicating a 4.4% decline from the prior-year quarter. 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 $1,151 million, mirroring a 2.8% decrease 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.

Factors at Play

Hyatt’s top line in the quarter to be reported is likely to be impacted by soft Owned and Leased Hotel segment. For quite some time now, the company has been witnessing declining sales at this segment. The ongoing weakness can be attributed to the company’s continual asset recycling. These apart, Hyatt has a strategy of asset sales that will strengthen its management and licensing arrangements instead of direct ownership of selective assets. Also, the company’s asset sales are outnumbering its asset possessions through new mergers. While this may increase the company’s franchise fees and reduce earnings volatility in the long run, short-term revenues are likely to be hurt.

However, the company’s strong brand recognition, efforts to enhance guest experience and increased focus on operational excellence bode well. Hyatt is also consistently trying to expand its presence worldwide and has expansion plans in Asia-Pacific, Europe, Africa, Middle East and Latin America. Expansion in these markets should help the company gain market share in the hospitality industry, thus boosting business.

Hyatt Hotels Corporation Price and EPS Surprise

What Does the Zacks Model Unveil?

Our proven model does not 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 -54.55% and a Zacks Rank #3, which make surprise prediction difficult.

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.

Stocks Poised to Beat Earnings Estimates

Here are some stocks from the Consumer Discretionary sector that investors may consider as our model shows that these have the right combination of elements to come up with an earnings beat in the to-be-reported quarter:

SeaWorld (NYSE:SEAS) has an Earnings ESP of +38.46% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Planet Fitness, Inc. (NYSE:PLNT) has an Earnings ESP of +11.86% and a Zacks Rank #2.

Hudson Ltd. (NYSE:H) has an Earnings ESP of +9.68% and a Zacks Rank #3.

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