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Leisure Demand & Expansion to Aid Hyatt's (H) Q1 Earnings
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Hyatt Hotels Corporation (H - Free Report) is scheduled to report first-quarter 2024 results on May 9, before the opening bell. In the last reported quarter, the company reported an earnings surprise of 68.4%.
The Trend in Estimate Revision
The Zacks Consensus Estimate for first-quarter earnings per share (EPS) is pegged at 73 cents, indicating an improvement of 78.1% from 41 cents reported in the year-ago quarter.
For revenues, the consensus mark is pegged at approximately $1.72 billion. The metric suggests an increase of 2.4% from the year-ago quarter’s figure.
Let's look at how things have shaped up in the quarter.
Factors to Note
Hyatt’s first-quarter 2023 performance is likely to have benefited from robust leisure and business transient demand, expansion initiatives and loyalty programs. This and the heightened interest in group meetings and events, along with the positive momentum in group pace for Hyatt's full-service managed properties in America, are expected to have contributed positively to the company's performance in the to-be-reported quarter.
For the to-be-reported quarter, we expect comparable systemwide hotels’ RevPAR to increase 6.2% year over year to $138.6. This reflects our expectations for average daily rate and occupancy rates to increase 0.1% to $202.4 and 400 basis points to 68.5% year over year.
The World of Hyatt program offers distinct benefits compared to other loyalty programs and holds considerable value for its members. While many loyalty programs have reduced member benefits, World of Hyatt is enhancing its offerings by introducing additional experiences, milestones, and opportunities for members, such as the expanded guest of honor benefit. This strategic expansion of the loyalty program is anticipated to increase room night penetration, thereby making Hyatt's brands more appealing to property owners.
Hyatt seeks to expand its market reach and accommodate various price ranges. This strategy not only stimulates loyalty membership but also attracts prospective hotel developers and owners by lowering distribution costs. The initiative aligns with the company's dedication to raising room fees, emphasizing quality earnings over room quantity and paving a path for shareholder benefits. We anticipate first-quarter total managed and franchised properties to increase 7.7% year over year to 1,485.
Hyatt sold 80% of its Unlimited Vacation Club (UVC) business for $80 million on Feb 14. Despite this, it will maintain management responsibilities for UVC under a long-term agreement, ensuring a smooth transition. Hyatt will receive management and royalty fees from its collaboration with UVC, with forecasts suggesting these fees will exceed $60 million for the rest of 2024. The sale is viewed positively as the transaction simplifies Hyatt's external reporting and is expected to lead to higher fee levels in the future. Our model predicts first-quarter revenues from Management, Franchise and Other Fees to rise 13.9% year over year to $263.2 million.
Although the increased travel has had a positive effect, the company acknowledges that the first quarter is being measured against an unusual demand period from the previous year. Owing to this, Hyatt expects a $20-million challenge in ALG vacations. The company expects reduced demand in Maui attributed to wildfires from the prior year levels.
What the Zacks Model Unveils
Our proven model predicts an earnings beat for Hyatt this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.
Earnings ESP: Hyatt has an Earnings ESP of +13.79%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: The company currently carries a Zacks Rank #3.
Our Take
While Hyatt's performance outlook appears promising, investors should exercise caution given the stock's recent surge in value. In the past six months, the company’s shares have surged by 43.8%, outperforming the industry gain of 24.9%.
Also, H valuation looks a bit stretched compared with its range as well as the industry average. The stock is currently trading at 41.94X forward 12-month price-to-earnings, which compares with 23.95X for the Zacks sub-industry and 16.66X for the Zacks sector.
As investors await H's first-quarter earnings report, the company's enduring strength, robust fundamentals, expansion strategies and anticipated financial performance paint a positive picture. However, concerns over unusual demand comparisons and stretched valuation warrant caution. We believe investors should refrain from initiating new positions in Hyatt at this juncture and wait for a potentially more suitable entry point, particularly in light of the upcoming first-quarter earnings report.
Other Stocks Poised to Beat on Earnings
Here are some other stocks from the Zacks Consumer Discretionary space that investors may consider, as our model shows that these, too, have the right combination of elements to post an earnings beat.
FNKO’s earnings for the to-be-reported quarter are expected to increase 40.8%. It reported better-than-expected earnings in three of the trailing four quarters and missed on one occasion, the average surprise being 42.8%.
Fox Corporation (FOXA - Free Report) has an Earnings ESP of +2.98% and a Zacks Rank of 3.
FOXA is expected to register a 4.3% increase in earnings for the to-be-reported quarter. It reported better-than-expected earnings in each of the trailing four quarters, the average surprise being 71.1%.
Choice Hotels International, Inc. (CHH - Free Report) has an Earnings ESP of +0.44% and a Zacks Rank of 3.
CHH is expected to register a 2.7% increase in earnings for the to-be-reported quarter. It reported better-than-expected earnings in three of the trailing four quarters and missed on one occasion, the average surprise being 2.7%.
Image: Bigstock
Leisure Demand & Expansion to Aid Hyatt's (H) Q1 Earnings
Hyatt Hotels Corporation (H - Free Report) is scheduled to report first-quarter 2024 results on May 9, before the opening bell. In the last reported quarter, the company reported an earnings surprise of 68.4%.
The Trend in Estimate Revision
The Zacks Consensus Estimate for first-quarter earnings per share (EPS) is pegged at 73 cents, indicating an improvement of 78.1% from 41 cents reported in the year-ago quarter.
For revenues, the consensus mark is pegged at approximately $1.72 billion. The metric suggests an increase of 2.4% from the year-ago quarter’s figure.
Hyatt Hotels Corporation Price and EPS Surprise
Hyatt Hotels Corporation price-eps-surprise | Hyatt Hotels Corporation Quote
Let's look at how things have shaped up in the quarter.
Factors to Note
Hyatt’s first-quarter 2023 performance is likely to have benefited from robust leisure and business transient demand, expansion initiatives and loyalty programs. This and the heightened interest in group meetings and events, along with the positive momentum in group pace for Hyatt's full-service managed properties in America, are expected to have contributed positively to the company's performance in the to-be-reported quarter.
For the to-be-reported quarter, we expect comparable systemwide hotels’ RevPAR to increase 6.2% year over year to $138.6. This reflects our expectations for average daily rate and occupancy rates to increase 0.1% to $202.4 and 400 basis points to 68.5% year over year.
The World of Hyatt program offers distinct benefits compared to other loyalty programs and holds considerable value for its members. While many loyalty programs have reduced member benefits, World of Hyatt is enhancing its offerings by introducing additional experiences, milestones, and opportunities for members, such as the expanded guest of honor benefit. This strategic expansion of the loyalty program is anticipated to increase room night penetration, thereby making Hyatt's brands more appealing to property owners.
Hyatt seeks to expand its market reach and accommodate various price ranges. This strategy not only stimulates loyalty membership but also attracts prospective hotel developers and owners by lowering distribution costs. The initiative aligns with the company's dedication to raising room fees, emphasizing quality earnings over room quantity and paving a path for shareholder benefits. We anticipate first-quarter total managed and franchised properties to increase 7.7% year over year to 1,485.
Hyatt sold 80% of its Unlimited Vacation Club (UVC) business for $80 million on Feb 14. Despite this, it will maintain management responsibilities for UVC under a long-term agreement, ensuring a smooth transition. Hyatt will receive management and royalty fees from its collaboration with UVC, with forecasts suggesting these fees will exceed $60 million for the rest of 2024. The sale is viewed positively as the transaction simplifies Hyatt's external reporting and is expected to lead to higher fee levels in the future. Our model predicts first-quarter revenues from Management, Franchise and Other Fees to rise 13.9% year over year to $263.2 million.
Although the increased travel has had a positive effect, the company acknowledges that the first quarter is being measured against an unusual demand period from the previous year. Owing to this, Hyatt expects a $20-million challenge in ALG vacations. The company expects reduced demand in Maui attributed to wildfires from the prior year levels.
What the Zacks Model Unveils
Our proven model predicts an earnings beat for Hyatt this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.
Earnings ESP: Hyatt has an Earnings ESP of +13.79%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: The company currently carries a Zacks Rank #3.
Our Take
While Hyatt's performance outlook appears promising, investors should exercise caution given the stock's recent surge in value. In the past six months, the company’s shares have surged by 43.8%, outperforming the industry gain of 24.9%.
Also, H valuation looks a bit stretched compared with its range as well as the industry average. The stock is currently trading at 41.94X forward 12-month price-to-earnings, which compares with 23.95X for the Zacks sub-industry and 16.66X for the Zacks sector.
As investors await H's first-quarter earnings report, the company's enduring strength, robust fundamentals, expansion strategies and anticipated financial performance paint a positive picture. However, concerns over unusual demand comparisons and stretched valuation warrant caution. We believe investors should refrain from initiating new positions in Hyatt at this juncture and wait for a potentially more suitable entry point, particularly in light of the upcoming first-quarter earnings report.
Other Stocks Poised to Beat on Earnings
Here are some other stocks from the Zacks Consumer Discretionary space that investors may consider, as our model shows that these, too, have the right combination of elements to post an earnings beat.
Funko, Inc. (FNKO - Free Report) currently has an Earnings ESP of +6.90% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
FNKO’s earnings for the to-be-reported quarter are expected to increase 40.8%. It reported better-than-expected earnings in three of the trailing four quarters and missed on one occasion, the average surprise being 42.8%.
Fox Corporation (FOXA - Free Report) has an Earnings ESP of +2.98% and a Zacks Rank of 3.
FOXA is expected to register a 4.3% increase in earnings for the to-be-reported quarter. It reported better-than-expected earnings in each of the trailing four quarters, the average surprise being 71.1%.
Choice Hotels International, Inc. (CHH - Free Report) has an Earnings ESP of +0.44% and a Zacks Rank of 3.
CHH is expected to register a 2.7% increase in earnings for the to-be-reported quarter. It reported better-than-expected earnings in three of the trailing four quarters and missed on one occasion, the average surprise being 2.7%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.