Hyatt's (H) Q3 Earnings To Suffer Despite Unit Expansion

Hyatt Hotels Corporation (NYSE:H) is slated to report third-quarter 2019 numbers on Oct 30, after the market closes.

In the last reported quarter, the company’s earnings and revenues surpassed the Zacks Consensus Estimate by 81% and 5.1%, respectively. Notably, its earnings topped analysts’ expectations in each of the trailing 14 quarters.

Which Way are Estimates Headed?

The Zacks Consensus Estimate for third-quarter earnings is pegged at 26 cents, indicating a 21.2% decline from the prior-year reported figure. The company’s earnings estimates have witnessed downward revisions over the past 30 days, reflecting analysts’ concern surrounding the stock.

For revenues, the consensus mark stands at $1.18 billion, suggesting almost 10% increase from the year-ago quarter.

Hyatt Hotels Corporation Price and EPS Surprise

Hyatt Hotels Corporation price-eps-surprise | Hyatt Hotels Corporation Quote

Factors at Play

Hyatt’s third-quarter revenues are likely to have been driven by continual unit growth strategy, robust loyalty program and increase in management, franchise, and other fees. Hyatt has been steadily investing in various businesses via acquisitions and divestment of low-margin units. Notably, the benefits of these initiatives might reflect in the to-be-reported quarter’s results.

The Zacks Consensus Estimate for Management, franchise and other fees is pegged at $152 million, implying 14.3% year-over-year growth. However, the estimated figure points to 3.8% decline from $158 million reported in the second quarter.

However, lower demand — particularly in the United States and China — is likely to have weighed on the company’s third-quarter earnings. Also, high expenses stemming from mergers and intense competition are expected to have weighed on margins and marred its bottom-line performance in the quarter to be reported.

What the Zacks Model Unveils

Our proven model doesn’t conclusively predict an earnings beat for Hyatt, which share space with Choice Hotels International, Inc. (NYSE:H) in the Hotels and Motels industry, this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can see the complete list of today’s Zacks #1 Rank stocks here.

It has an Earnings ESP of -14.92% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Stocks With Favorable Combination

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

Melco Resorts & Entertainment Limited (NASDAQ:MLCO) has an Earnings ESP of +2.44% and a Zacks Rank #3 at present.

Wyndham Destinations, Inc. (NYSE:WYND) has an Earnings ESP of +0.14% and carries a Zacks Rank #3.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

Today, See These 5 Potential Home Runs >>