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Analyst Blog

The earnings season is gradually coming to a close. We notice that the Consumer Discretionary sector has, so far, outpaced most other sectors in terms of top and bottom-line growth.

Per our latest Earnings Preview report, 74.3% of the Consumer Discretionary companies in the S&P 500 index have reported their results, as of Nov 4. Growth rate for earnings and revenues is 15% and 17.1%, respectively. Moreover, the beat ratios for this sector have been remarkable (73.1% for earnings and 50% for revenues).

Turning our focus to the leisure companies from the sector, we note that the performance of the stocks has been mixed so far this earnings season.

Among the leisure stocks that have reported, Polaris Industries Inc. (PII - Free Report) and The Marcus Corporation (MC - Free Report) have delivered better-than-expected performance. However, ClubCorp Holdings, Inc. (MYCC - Free Report) missed both revenue and earnings estimates, while Zynga, Inc. (ZNGA - Free Report) lagged earnings and topped the revenue estimates.

A few leisure companies are set to report their third-quarter 2016 results on Nov 8. 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:

SeaWorld Entertainment, Inc. (SEAS - Free Report) posted a negative earnings surprise of 8.70% last quarter. In fact, the company lagged the Zacks Consensus Estimate in three of the last four quarters with an average miss of 3.65%.

Notably, our proven model shows that an earnings beat is uncertain for SeaWorld in the quarter. This is because a company needs the right combination of the two key ingredients – a positive Earnings ESP and a Zacks Rank #3 (Hold) or better – to increase its odds of an earnings surprise. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

For the quarter, the company has an Earnings ESP of -2.80% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

SEAWORLD ENTERT Price and EPS Surprise

Notably, the Zacks Consensus Estimate for the quarter’s earnings is pegged at $1.07. We expect the decline in traffic trends to have continued in the quarter and the company’s decision to stop breeding killer whales to have an adverse impact on the top-line. However, new initiatives undertaken by management to stabilize and deliver improved results in California, Texas and Florida markets bode well (read more: SeaWorld (SEAS - Free Report) Q3 Earnings: Disappointment in the Cards?).

Cinemark Holdings, Inc. (CNK - Free Report) recorded a negative earnings surprise of 9.80% in the last quarter. However, the company surpassed the earnings estimates in two of the trailing four quarters, bringing the average surprise to a positive 2.09%.

For the quarter, we expect Cinemark to beat expectations as the company has an Earnings ESP of +1.82% and a Zacks Rank #3. The Zacks Consensus Estimate for the quarter’s bottom line is pegged at 55 cents.

CINEMARK HLDGS Price and EPS Surprise

ILG, Inc. (ILG - Free Report) recorded a positive earnings surprise of 16.13% in the last quarter. In fact, the company’s results outpaced/met estimates in each of the trailing four quarters, with an average surprise of a positive 8.38%.

We note that ILG is unlikely to post a beat in the quarter as it has a Zacks Rank #5 (Strong Sell) and an Earnings ESP of -3.85%. The Zacks Consensus Estimate for the quarter’s bottom line is pegged at 26 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.

ILG INC Price and EPS Surprise

Stay tuned! Check back on our full write-up on earnings releases of these stocks.

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