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Leisure Stocks' Q1 Earnings Due on Apr 26: HLT, MGM and More


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The Q1 reporting cycle is underway with 87 S&P 500 members having released their quarterly numbers (as of Apr 20). Per the latest Earnings Preview , 82.8% surpassed earnings estimates while 67.8% beat revenue estimates and 62.1% outpaced both the counts. Further, total earnings of these companies increased 25% from the same period last year on 10.7% higher revenues.

The report projects an 18.3% year-over-year rise in total earnings for S&P 500 companies, with revenues likely to increase 7.7%. This compares favorably with the year-over-year increase of 13.4% for earnings in the fourth quarter but unfavorably with 8.6% year-over-year revenue growth in the last reported quarter.

Consumer Discretionary Sector on Growth Trajectory

Like some other sectors, the widely diversified Consumer Discretionary sector is likely to put up a stellar show in Q1 earnings.

Currently, the domestic economy is favorable for the consumer discretionary sector on increased demand for goods and services. According to the Fed's latest forecast, the economy will grow at a reasonable rate of 2.7% in 2018. Unemployment is predicted at 3.8% for 2018. Moreover, high real disposable income and low inflation are resulting in improved purchasing behavior. The fourth quarter of 2017 saw the highest consumer spending in three years.

Total earnings for the sector are expected to increase 7.2% in the first quarter, up from 0.8% in the last reported quarter. Revenues are projected to grow 6.8%, higher than 4.6% growth recorded in the preceding quarter. Even though margins are not  expected to grow for the sector in the first quarter, it compares favorably with 0.4% decline in the fourth quarter of 2017.

Promising Gaming Industry Scenario

The Zacks Gaming industry , under Consumer Discretionary, has performed well in the past year. The industry gained 24.1%, outpacing the S&P 500's rally of 12.2%. We expect the industry to have grown in the first quarter on increasing demand for gaming services and rapid expansion of these service providers. Also, according to Research and Markets, the global casino gaming market is anticipated to witness a CAGR of 10.16% in the 2017-2021 period.

Within this growing market, Boyd Gaming Corporation BYD is the distinguished owner and operator of 22 gaming entertainment properties. The company is scheduled to report quarterly numbers on Apr 26, after market close. Over the past year, the company has gained 50.7% outperforming the industry.

The Zacks Consensus Estimate for first-quarter earnings is pegged at 34 cents, reflecting a year-over-year increase of 6.3%. Meanwhile, analysts polled by Zacks expect revenues of $604.88 million, suggesting a decline of 0.1% from the year-ago quarter.

Boyd Gaming carries a Zacks Rank #4 (Sell) and an Earnings ESP of +2.44%, a combination that does not indicate a beat. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .


Another casino giant, MGM Resorts International MGM is slated to release first-quarter 2018 results on Apr 26, before the market opens. The company's shares grew 21.1% in the past year, lagging the industry.

MGM Resorts' top line in the first quarter is expected to be driven by strong business model, extensive non-gaming revenue opportunities, high-quality assets and attractive property locations. Further, maximization of digital technology is likely to boost the company's performance. (Read More: MGM Resorts Q1 Earnings: Macau Operations Hold Key ).

The consensus estimate pegs first-quarter earnings at 31 cents, reflecting a decline of 18.4% year over year. Revenues, however, are projected to grow 3.3% to $2.80 billion. MGM Resorts has a Zacks Rank #2 (Buy) and an Earnings ESP of -0.87%, a combination that does not suggest a beat. You can see  the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Traditional Toymakers in a Fix

Meanwhile, the Zacks Toys - Games - Hobbies industry gained 19.2% in the past year, outperforming the S&P 500. However, with the recent Toys "R" Us liquidation, we expect the industry to grow at a much slower pace for quite some time.

First-quarter results for the famous toymaker Mattel, Inc. MAT will be affected, as a considerable portion of its revenues were generated from sales to Toys "R" Us. (Read More: Factors Setting the Tone for Mattel's Q1 Earnings ). The company is scheduled to report first-quarter 2018 numbers on Apr 26, after market close. Its shares have lost 37.1% in the past year, reflecting its sluggish performance.

The Zacks Consensus Estimate for the quarter under review is pegged at a loss of 37 cents, wider than a loss of 32 cents in the year-ago quarter. Notably, the consensus mark has witnessed a downward revision over the past 30 days. Moreover, analysts polled by Zacks expect revenues of nearly $690.9 million, down 6.1% from the prior-year quarter.

Mattel holds a Zacks Rank #5 (Strong Sell) and has an Earnings ESP of +0.64%, a combination that does not show a beat.


U.S. Hotels Seem Comforting

There are ample reasons why the U.S. hotel industry should continue to gain on both the top and bottom line. A strong economy, higher income and increased consumer confidence have driven demand for both leisure and business travel. The supply-demand environment in the United States has been favorable since 2010, with growth in demand outpacing supply growth. PricewaterhouseCoopers (PwC) expects demand (2.1% rise) to outpace supply (increase of 1.9%) in 2018. Moreover, per a report by Deloitte, the hotel industry is expected to sustain strong 5-6% growth throughout 2018.

The Zacks Hotels and Motels industry has rallied 30.1% in the past year, outperforming the S&P 500.

Hotel bigwig Hilton Worldwide Holdings Inc. HLT is scheduled to report first-quarter 2018 numbers on Apr 26, before the market opens. The hotel chain's aggressive expansion strategies and industry-leading loyalty program are expected to have majorly aided revenues in the first quarter. Moreover, a capital-light business model, efficient cost management and steady revenue per available room growth (ReVPAR) are expected to reflect in the company's earnings in the to-be-reported quarter. (Read More: Hilton's Q1 Earnings: Unit Expansion to Drive Results ).

The Zacks Consensus Estimate for first-quarter revenues is pegged at $2.26 billion, reflecting 4.4% year-over-year growth. Moreover, the consensus estimate pegs earnings at 50 cents, suggesting 31.6% year-over-year growth. This exceeds the company's expected earnings in the range of 43-47 cents per share for the quarter to be reported.

Hilton carries a Zacks Rank #3 (Hold) and an Earnings ESP of +3.09%, a combination that increases the odds of a beat. Also, the company has gained grew 40.2% in the past year.


Another major hotelier Extended Stay America, Inc. STAY is scheduled to report first-quarter 2018 results on Apr 26, after market close. While the company's expense containment and cost-saving measures are expected to have favored first-quarter earnings, revenues in the quarter might have been affected by a shift in Easter date. (Read More: Can Cost-Cut Efforts Favor Extended Stay Q1 Earnings? )

The Zacks Consensus Estimate for first-quarter earnings stands at 17 cents, reflecting a year-over-year increase of 13.3%. Meanwhile, analysts polled by Zacks project revenues of $290.66 million, reflecting a decline of 0.1% from the year-ago quarter.

Extended Stay carries a Zacks Rank #3 and an Earnings ESP of +3.50%, a combination that increases the odds of a beat. The company's shares have underperformed the industry with growth of 14.8% in the past year.

A Mixed Bag for Leisure and Recreation Services

Although the Zacks Leisure and Recreation Services industry , within Consumer Discretionary, has rallied 7.2% in the past year, underperforming the S&P 500's growth, increased consumer spending on leisure stocks is expected to have favored the industry's results in the first quarter.

Royal Caribbean Cruises Ltd. RCL , a prominent cruise stock within the industry, is scheduled to report first-quarter 2018 results on Apr 26, before the opening bell. The company's shares have rallied 18.3%, outperforming both the industry and the S&P 500.


Royal Caribbean's top line in the first quarter is expected to be driven by robust book position and onboard revenues. Subsequently, the consensus estimate for first-quarter revenues is pinned at $2.05 billion, reflecting 1.9% growth over the prior-year quarter. However, the consensus estimate for the quarter's earnings is 96 cents, suggesting a 3% year-over-year decline. (Read More: Will Higher Costs Impact Royal Caribbean's Q1 Earnings? )

Royal Caribbean has a Zacks Rank #3 and an Earnings ESP of +0.14, a combination that raises chances of a beat.

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MGM Resorts International (MGM): Free Stock Analysis Report

Boyd Gaming Corporation (BYD): Free Stock Analysis Report

Extended Stay America, Inc. (STAY): Free Stock Analysis Report

Hilton Worldwide Holdings Inc. (HLT): Free Stock Analysis Report

Royal Caribbean Cruises Ltd. (RCL): Free Stock Analysis Report

Mattel, Inc. (MAT): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: MGM , BYD , STAY , HLT , RCL


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