We have reached the last leg of the fourth-quarter earnings season. Let’s take a look at how the widely diversified Consumer Discretionary sector has fared this time around.
According to the latest Earnings Preview, 71.4% of the Consumer Discretionary companies in the S&P 500 index have already reported their results as of Feb 10. The growth rate for earnings and revenues is 4.6% and 5.6%, respectively. Moreover, the beat ratios for this sector have been noteworthy (76.0% for earnings and 68.0% for revenues).
Hotel Stocks in Focus
A steady rise in business and leisure travel on the back of an improving economy, positive employment numbers and strong investor appetite owing to higher transaction volumes are spreading cheer across the hotel industry. However, macroeconomic concerns in several emerging economies, softening occupancy levels and negative currency translation raise concerns.
On the whole, though pockets of geopolitical instability and economic slowdown continue to weigh on sentiment, hoteliers are cautiously optimistic as players from the space report their numbers.
Four hotel companies are set to report their fourth-quarter and full-year 2016 numbers on Feb 15. Will these companies manage to put up a decent performance? Let’s take a look at what might be in store for them this quarter:
Marriott International, Inc. MAR registered a positive earnings surprise of 1.11% in the previous quarter. In fact, the company’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, with an average beat of 2.78%
Marriott International Price and EPS Surprise
Marriott International Price and EPS Surprise | Marriott International Quote
Notably, our proven model shows that an earnings beat is likely for Marriott this time around. This is because the company has the right combination of the two key ingredients – a Zacks Rank #3 (Hold) or better and a positive Earnings ESP – to increase its odds of an earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
For the fourth quarter, the company has an Earnings ESP of +2.41% and a Zacks Rank #3. The Zacks Consensus Estimate for the quarter’s bottom line is pegged at 83 cents.
Notably, Marriott’s earnings have been surpassing the Zacks Consensus Estimate consistently over the past few quarters on the back of solid revenue per available room (RevPAR) growth as well as strong margins. We expect the trend to continue in fourth quarter as well. However, lingering global uncertainties, competition in domestic market coupled with negative currency translation is likely to hurt top-line growth (read more: Can Marriott Keep Its Earnings Streak Alive in Q4?).
Wyndham Worldwide Corporation WYN recorded a positive earnings surprise of 1.07% in the preceding quarter. In fact, the company posted positive earnings surprises in three of the past four quarters, with an average beat of 0.98%.
Wyndham Worldwide Corp Price and EPS Surprise
Wyndham Worldwide Corp Price and EPS Surprise | Wyndham Worldwide Corp Quote
For the quarter, we expect Wyndham to beat expectations as the company has an Earnings ESP of +2.31% and a Zacks Rank #3. Notably, the Zacks Consensus Estimate for the quarter’s earnings is pegged at $1.30.
Wyndham’s strong developmental pipeline, consistent expansion plans, significant international exposure and robust marketing efforts is expected to drive earnings in the to-be-reported quarter. Nevertheless, negative currency translation and uncertainty in international markets could dampen its revenues (read more: Wyndham to Report Q4 Earnings: A Beat in the Cards?).
Hilton Worldwide Holdings Inc. HLT posted in-line earnings last quarter. Meanwhile, the trailing four-quarter average earnings surprise is a positive 0.60%.
Hilton Worldwide Holdings Inc. Price and EPS Surprise
Hilton Worldwide Holdings Inc. Price and EPS Surprise | Hilton Worldwide Holdings Inc. Quote
For the quarter, the company has an Earnings ESP of +6.15% and a Zacks Rank #5 (Strong Sell), thereby making it difficult to conclusively predict a beat. The Zacks Consensus Estimate for the quarter’s bottom line is pegged at 65 cents.
Notably, 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.
The company’s geographic exposure, solid transient business as well as improving group business trends are expected to drive RevPAR in the fourth quarter. Nonetheless, management notes that the unfavorable October calendar shift and the fact that November and December are typically low group months, could result in softness in transient growth, thereby weighing on the top line (read more: Hilton Q4 Earnings: What's in Store for the Stock?).
Choice Hotels International, Inc. CHH posted a positive earnings surprise of 6.33% in the last quarter. In fact, the company’s earnings surpassed the Zacks Consensus Estimate in three of the last four quarters, with an average beat of 2.67%.
Choice Hotels International, Inc. Price and EPS Surprise
Choice Hotels International, Inc. Price and EPS Surprise | Choice Hotels International, Inc. Quote
For the quarter, the company has an Earnings ESP of 0.00%, which makes surprise prediction difficult even though the company has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Notably, the Zacks Consensus Estimate for the quarter’s earnings is pegged at 54 cents.
Stay tuned! Check back on our full write-up on earnings releases of these stocks.
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Wyndham Worldwide Corp (WYN): Free Stock Analysis Report
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