Hyatt Hotels CorporationH is set to report fourth-quarter and full year 2015 results on Feb 18, before the market opens. Last quarter, the company posted a positive earnings surprise of 31.82%. However, the company has posted negative earnings surprise in two of the trailing four quarters, with an average negative surprise of -11.21%.
Let's see how things are shaping up prior to this announcement.
Factors to Consider
Hyatt has been facing major headwinds over the past few quarters mainly due to a strong dollar, which led to unfavorable foreign exchange translation. Given its significant presence in Europe and Asia, the company's fourth-quarter revenues are likely to be hurt by currency headwinds.
Further, a slowdown in the Chinese economy is expected to deal a major blow to Hyatt's top line, as China is one of its most important markets. We thus expect revenues at Hyatt to remain under pressure. Moreover, the company's business in New York continues to be impacted by an oversupply of hotels.
On the bright side, Hyatt's performance in the U.S. is likely to retain its strength. The ongoing recovery in the country's economy, improved group demand and greater pricing power resulted in strong RevPAR over the past few quarters - a trend that is anticipated to have continued in the fourth quarter as well.
Yet, analysts are clearly not impressed with this company, as is evident from the southward movement of estimates for both fourth-quarter 2015 and the full year over the past 60 days.
Our proven model does not conclusively show that Hyatt is likely to beat earnings 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. However, that is not the case here, as you will see below.
Zacks ESP: The company's Earnings ESP is -12.50%. This is because the Most Accurate estimate is pegged at 21 cents, while the Zacks Consensus Estimate stands higher at 24 cents.
Zacks Rank: Hyatt has a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies in the broader consumer discretionary sector that you may want to consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Wynn Resorts Ltd. WYNN , with an Earnings ESP of +1.33% and a Zacks Rank #3.
MGM Resorts International MGM , with an Earnings ESP of +50.00% and a Zacks Rank #2
Vista Outdoor Inc. VSTO , with an Earnings ESP of +7.27% and a Zacks Rank #2