Hyatt Hotels (H): Is a Beat in the Cards in Q4 Earnings?

Leading global hospitality company, Hyatt Hotels CorporationH , is scheduled to report fourth-quarter and full-year 2016 results on Feb 16, before the opening bell. We expect the company to surpass expectations.

Last quarter, Hyatt Hotels posted a positive earnings surprise of 67.86%. In fact, the company's earnings surpassed the Zacks Consensus Estimate in three of the last four quarters, with an average beat of 24.67%.

Hyatt Hotels Corporation Price and EPS Surprise

Hyatt Hotels Corporation Price and EPS Surprise | Hyatt Hotels Corporation Quote

Why a Likely Positive Surprise?

Our proven model shows that Hyatt Hotels is likely to beat on earnings because it has the perfect combination of the two key ingredients.

Zacks ESP:Earnings ESP for Hyatt Hotels is +12.50% because the Most Accurate estimate stands at 27 cents, while the Zacks Consensus Estimate is pegged at 24 cents. This is a meaningful indicator for a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank: Hyatt Hotels currently has a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings estimates.

Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.

The combination of Hyatt Hotels' favorable Zacks Rank and positive Earnings ESP makes us reasonably confident of an earnings beat.

What is Driving the Better-than-Expected Earnings?

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 Revenue per Available Room (RevPAR) over the past few quarters. We expect the trend to have continued in the fourth quarter as well.

Further, the company continues to gain from increasing market share and large-scale development. In the third quarter, the company opened 11 new hotels globally and is expected to open 20 more in the to-be-reported quarter. Additionally, comparatively untapped and growing markets like China, India and Eastern Europe continue to be areas of regional strength for the company and are expected to bolster growth. These endeavors look to fortify the brand's presence in growing markets and add to the top line.

However, management noted that booking pace for the fourth quarter was slightly down from the last year, reflecting a challenging quarter that includes both the Jewish holidays and the US Presidential Election. Further, pressure on margins due to lower nominal growth in RevPAR weakening business transient travel, continued weakness in France exacerbated by the impact of renovations, concerns regarding the spread of the Zika virus, and negative currency translations, could mar the quarter's performance.

Stocks to Consider

Hyatt Hotels is not the only company looking up this earnings season. Here are some other hotel companies to consider as our model shows they also have the right combination of elements to post an earnings beat this quarter:

Extended Stay America, Inc. STAY has an Earnings ESP of +21.43% and a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here .

Marriott International, Inc. MAR has an Earnings ESP of +2.41% and a Zacks Rank #3.

Wyndham Worldwide Corporation WYN has an Earnings ESP of +2.31% and a Zacks Rank #3.

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Wyndham Worldwide Corp (WYN): Free Stock Analysis Report

Marriott International (MAR): Free Stock Analysis Report

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Extended Stay America, Inc. (STAY): 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.

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

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