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Leisure Stocks' Q2 Earnings Due on Jul 31: H, IGT and RRR
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We are in the thick of the second-quarter earnings season, with 265 S&P 500 members having released their quarterly numbers (as of Jul 27). Per the latest Earnings Preview, 80.8% of the companies, which have reported their results, surpassed earnings estimates while 72.1% beat revenue estimates. Further, the total earnings of these companies increased 23.6% from the same period last year on 10.1% higher revenues.
The report projects 23.6% year-over-year rise in the total earnings for S&P 500 companies, with revenues likely to increase 8.8%. This compares with the year-over-year increase of 24.6% for earnings in the first quarter and 8.6% year-over-year revenue growth in the last reported quarter.
A Mixed Bag for Consumer Discretionary Sector
Like some other sectors, the widely diversified Consumer Discretionary sector (among 12 of the 16 Zacks categorized sectors) is likely to put up a decent show in Q2 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 2.8% in 2018. Unemployment is predicted at 3.6% for 2018. Moreover, high real disposable income and low inflation are resulting in improved purchasing behavior. Also, per a recent report by Trading Economics from the University of Michigan, consumer spending index in the next two quarters is expected to rise to 122.1 and 122.4, respectively.
Total earnings for the sector are expected to increase 11.5% in the second quarter, slightly lower than 14.7% growth attained in the last reported quarter. Revenues are projected to grow 5.7%, higher than 3.6% growth recorded in the preceding quarter. Even though margins are not expected to outpace the first quarter’s increase of 1.1%, it is projected to rise 0.6% in the second quarter.
Long-Term Potential in the Gaming Industry
The Zacks Gaming industry has been experiencing strong growth since the second half of 2016. The trend is likely to continue through 2018, as the recent decision taken by the Supreme Court is going to allow sports betting outside Nevada. It is expected to give the industry a new lease of life. However, recent numbers published by The Macau Gaming Inspection and Coordination Bureau have raised concerns for the short term. Though gaming revenues from Macau increased 12.1% in May, lagging analysts’ expectations, it edged down 0.9% from April. Speculations over another crackdown on capital outflows by China have vexed investors as well.
Despite coming a long way, the industry has slightly underperformed the S&P 500 composite market over the past year. While stocks in this industry have collectively gained 10.3% over the past year, the Zacks S&P 500 Composite has rallied 14.8%.
Amid such circumstances, International Game Technology PLC (IGT - Free Report) , a casino operator, is scheduled to release second-quarter 2018 numbers on Jul 31, before the market opens. The Zacks Consensus Estimate for second-quarter earnings is pegged at 34 cents, reflecting a year-over-year increase of 126.7%. Meanwhile, the consensus estimate for revenues of $1.2 billion, suggests a decline of 3.2% from the year-ago quarter.
International Game Technology currently carries a Zacks Rank #3 (Hold) and has an Earnings ESP of -25.60%, a combination that does not predict a beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter. However, despite missing earnings in two of the trailing four quarters, the company’s average earnings beat has been 10.9%.
International Game Technology Price and EPS Surprise
Red Rock Resorts, Inc. (RRR - Free Report) , a gaming facility provider, will also report its second-quarter earnings on Jul 31, after the market closes. The company’s earnings surpassed estimates in each of the trailing four quarters, with an average beat of 32.7%. For the second quarter, the consensus estimate predicts earnings of 25 cents, down from 56 cents in the prior-year quarter. However, sales estimates predict revenues to grow 1.2% in the second quarter compared with the second quarter of 2017.
With a Zacks Rank #2 (Buy) and an Earnings ESP of +4.00%, the company is poised for an earnings beat in the second quarter.
There’s no denying that the situation year to date has been rough for the Hotels and Motels industry. Notably, it has witnessed a decline of 13.3% against the S&P 500’s gain. Unfavorable governmental policies, uncertainty in certain markets and RevPAR pressure have negatively impacted the industry players.
Despite the aforementioned headwinds, stocks in the hotel industry are likely to benefit from rise in demand, supporting increases in occupancy and average daily rate (ADR). In fact, the occupancy rate in the United States has touched the highest level in 30 years. In first-quarter 2018, the industry witnessed a better-than-expected increase in demand, with revenue per available room (RevPAR) improving by 3.5%. A recent report by PricewaterhouseCoopers (PwC) shows that new supply is likely to rise 2% in 2018, up from 1.8% in 2017. This, in turn, may result in a 0.3% increase in occupancy rates in 2018 to 66.3%. Moreover, ADR and RevPAR are anticipated to improve 2.6% and 3% this year, respectively. In 2019, the industry is likely to register ADR and RevPAR growth of 2.8% each.
Hotel bigwig Hyatt Hotels Corporation (H - Free Report) is slated to report second-quarter 2018 numbers on Jul 31, after the market closes. The company’s ongoing asset recycling program is helping, in terms of strengthening liquidity and protecting current liabilities, with a combination of cash and liquid assets. However, the continual disposition of assets, without replacement by acquisitions, is likely to have weighed on the company’s second-quarter revenues, which, in turn, might have affected earnings.
The Zacks Consensus Estimate for second-quarter revenues is pegged at $1.1billion, reflecting a 4.2% decline from the second quarter of 2017. We believe, primarily, the decline in revenues might have stemmed from the company’s lower revenues from owned and leased hotels, which declined 11.9% year over year in the first quarter of 2018. Apart from lower revenues negatively affecting earnings in the second quarter, we also believe that lower EBITDA margin may have caused earnings to decline as the consensus estimate for the second quarter’s earnings of 48 cents suggests a 7.7% decrease from the year-ago quarter. (Read More: Soft Owned and Leased Sales to Hurt Hyatt's Q2 Earnings)
Hyatt currently has an Earnings ESP of +7.29% and a Zacks Rank #2, increasing the odds of an earnings beat in the to-be-reported quarter.
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Image: Bigstock
Leisure Stocks' Q2 Earnings Due on Jul 31: H, IGT and RRR
We are in the thick of the second-quarter earnings season, with 265 S&P 500 members having released their quarterly numbers (as of Jul 27). Per the latest Earnings Preview, 80.8% of the companies, which have reported their results, surpassed earnings estimates while 72.1% beat revenue estimates. Further, the total earnings of these companies increased 23.6% from the same period last year on 10.1% higher revenues.
The report projects 23.6% year-over-year rise in the total earnings for S&P 500 companies, with revenues likely to increase 8.8%. This compares with the year-over-year increase of 24.6% for earnings in the first quarter and 8.6% year-over-year revenue growth in the last reported quarter.
A Mixed Bag for Consumer Discretionary Sector
Like some other sectors, the widely diversified Consumer Discretionary sector (among 12 of the 16 Zacks categorized sectors) is likely to put up a decent show in Q2 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 2.8% in 2018. Unemployment is predicted at 3.6% for 2018. Moreover, high real disposable income and low inflation are resulting in improved purchasing behavior. Also, per a recent report by Trading Economics from the University of Michigan, consumer spending index in the next two quarters is expected to rise to 122.1 and 122.4, respectively.
Total earnings for the sector are expected to increase 11.5% in the second quarter, slightly lower than 14.7% growth attained in the last reported quarter. Revenues are projected to grow 5.7%, higher than 3.6% growth recorded in the preceding quarter. Even though margins are not expected to outpace the first quarter’s increase of 1.1%, it is projected to rise 0.6% in the second quarter.
Long-Term Potential in the Gaming Industry
The Zacks Gaming industry has been experiencing strong growth since the second half of 2016. The trend is likely to continue through 2018, as the recent decision taken by the Supreme Court is going to allow sports betting outside Nevada. It is expected to give the industry a new lease of life. However, recent numbers published by The Macau Gaming Inspection and Coordination Bureau have raised concerns for the short term. Though gaming revenues from Macau increased 12.1% in May, lagging analysts’ expectations, it edged down 0.9% from April. Speculations over another crackdown on capital outflows by China have vexed investors as well.
Despite coming a long way, the industry has slightly underperformed the S&P 500 composite market over the past year. While stocks in this industry have collectively gained 10.3% over the past year, the Zacks S&P 500 Composite has rallied 14.8%.
Amid such circumstances, International Game Technology PLC (IGT - Free Report) , a casino operator, is scheduled to release second-quarter 2018 numbers on Jul 31, before the market opens. The Zacks Consensus Estimate for second-quarter earnings is pegged at 34 cents, reflecting a year-over-year increase of 126.7%. Meanwhile, the consensus estimate for revenues of $1.2 billion, suggests a decline of 3.2% from the year-ago quarter.
International Game Technology currently carries a Zacks Rank #3 (Hold) and has an Earnings ESP of -25.60%, a combination that does not predict a beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter. However, despite missing earnings in two of the trailing four quarters, the company’s average earnings beat has been 10.9%.
International Game Technology Price and EPS Surprise
International Game Technology Price and EPS Surprise | International Game Technology Quote
Red Rock Resorts, Inc. (RRR - Free Report) , a gaming facility provider, will also report its second-quarter earnings on Jul 31, after the market closes. The company’s earnings surpassed estimates in each of the trailing four quarters, with an average beat of 32.7%. For the second quarter, the consensus estimate predicts earnings of 25 cents, down from 56 cents in the prior-year quarter. However, sales estimates predict revenues to grow 1.2% in the second quarter compared with the second quarter of 2017.
With a Zacks Rank #2 (Buy) and an Earnings ESP of +4.00%, the company is poised for an earnings beat in the second quarter.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Red Rock Resorts, Inc. Price and EPS Surprise
Red Rock Resorts, Inc. Price and EPS Surprise | Red Rock Resorts, Inc. Quote
What Lies Ahead for Hotel Industry?
There’s no denying that the situation year to date has been rough for the Hotels and Motels industry. Notably, it has witnessed a decline of 13.3% against the S&P 500’s gain. Unfavorable governmental policies, uncertainty in certain markets and RevPAR pressure have negatively impacted the industry players.
Despite the aforementioned headwinds, stocks in the hotel industry are likely to benefit from rise in demand, supporting increases in occupancy and average daily rate (ADR). In fact, the occupancy rate in the United States has touched the highest level in 30 years. In first-quarter 2018, the industry witnessed a better-than-expected increase in demand, with revenue per available room (RevPAR) improving by 3.5%. A recent report by PricewaterhouseCoopers (PwC) shows that new supply is likely to rise 2% in 2018, up from 1.8% in 2017. This, in turn, may result in a 0.3% increase in occupancy rates in 2018 to 66.3%. Moreover, ADR and RevPAR are anticipated to improve 2.6% and 3% this year, respectively. In 2019, the industry is likely to register ADR and RevPAR growth of 2.8% each.
Hotel bigwig Hyatt Hotels Corporation (H - Free Report) is slated to report second-quarter 2018 numbers on Jul 31, after the market closes. The company’s ongoing asset recycling program is helping, in terms of strengthening liquidity and protecting current liabilities, with a combination of cash and liquid assets. However, the continual disposition of assets, without replacement by acquisitions, is likely to have weighed on the company’s second-quarter revenues, which, in turn, might have affected earnings.
The Zacks Consensus Estimate for second-quarter revenues is pegged at $1.1billion, reflecting a 4.2% decline from the second quarter of 2017. We believe, primarily, the decline in revenues might have stemmed from the company’s lower revenues from owned and leased hotels, which declined 11.9% year over year in the first quarter of 2018. Apart from lower revenues negatively affecting earnings in the second quarter, we also believe that lower EBITDA margin may have caused earnings to decline as the consensus estimate for the second quarter’s earnings of 48 cents suggests a 7.7% decrease from the year-ago quarter. (Read More: Soft Owned and Leased Sales to Hurt Hyatt's Q2 Earnings)
Hyatt currently has an Earnings ESP of +7.29% and a Zacks Rank #2, increasing the odds of an earnings beat in the to-be-reported quarter.
Hyatt Hotels Corporation Price and EPS Surprise
Hyatt Hotels Corporation Price and EPS Surprise | Hyatt Hotels Corporation Quote
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Click for details >>