Hyatt is currently undertaking an asset recycling program, which is expected to strengthen its liquidity while protecting current liabilities. However, continual disposition of assets and lesser acquisitions are likely to have weighed on the company's third-quarter revenues, which, in turn, might have affected earnings.
Additionally, Hyatt's Owned and Leased segment revenues have been showing dismal trends of late. It is likely to have continued in the to-be-reported quarter.
However, solid expansion and strategic decisions have helped the company's shares rally 4.6% in the past year against the industry 's collective decline of 22.8%.
Owned and Leased Sales to Dent Overall Top Line
The Zacks Consensus Estimate for third-quarter revenues is pegged at $1.1billion, reflecting a 2.4% decline from the third quarter of 2017. We believe, primarily, decline in revenues should have stemmed from the company's lower revenues from owned and leased hotels, which declined 15.8% year over year in the second quarter of 2018 as well.
Meanwhile, it is to be noted that Hyatt has a strategy of asset sales that is likely to strengthen its management and licensing arrangements instead of direct ownership of selective assets. Further, 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 affected.
How Will Earnings Shape Up?
Despite strong EBITDA margins recorded in the last reported quarter, lower revenues and profits from owned and leased segment are likely to have marred Hyatt's earnings in the to-be-reported quarter. Subsequently, the Zacks Consensus Estimate for earnings in the third quarter is pegged at 25 cents, suggesting a 3.9% decrease from the year-ago quarter.
Moreover, modest growth rate in the United States is likely to have affected the company's profitability in the third quarter of 2018.
Quantitative Model Doesn't Predict a Beat
Hyatt doesn't have the right combination of the two main ingredients - a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher - for increasing the odds of an earnings beat.
Earnings ESP: The company has an Earnings ESP of -3.52%. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .
Zacks Rank: Hyatt currently has a Zacks Rank #3. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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
Stocks to Consider
Here are some companies from the Consumer Discretionary sector that are poised to record an earnings beat this quarter.
Acushnet Holdings GOLF has an Earnings ESP of +28.57% and a Zacks Rank #3. The company is slated to report quarterly results on Nov 1.
Penn National PENN has an Earnings ESP of +1.29% and a Zacks Rank #3. The company is scheduled to report quarterly numbers on Nov 1.
SeaWorld Entertainment SEAS is scheduled to report quarterly results on Nov 5. The company presently flaunts a Zacks Rank #1 and has an Earnings ESP of +4.05%.
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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.