Which Top Hotel Stock has the Strongest Earnings Trends?

Earnings trends are extremely important when evaluating stocks. At Wall St. Cheat Sheet, we view increasing earnings quarter-over-quarter as a simple way to gauge whether costs and the business model are stable. Then we like to analyze whether the company is outperforming peers in the sector. This is what we call the “E-Squared” investment analysis (‘E = Earnings Are Increasing Quarter-Over-Quarter’ + ‘E = Excellent Relative Performance Versus Peers and Sector’).

Stocks with improving earnings metrics are worthy of your extra attention. Click here to discover our CHEAT SHEET stock picks now!

Here’s your Cheat Sheet to how the top 5 hotel stocks rank via earnings trends:

Hyatt Hotels (NYSE:H): Current Price $41.54

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 3,835 3,330 3,527 3,698 3,949
Diluted EPS ($) 1.31 -0.28 0.38 0.67 0.53

Hyatt picked itself up after 2009 and improved revenue and EPS substantially, though we don’t like that EPS in 2012.

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012
Revenue ($) in millions 990.00 958.00 1,014 977.00 1,000
Diluted EPS ($) 0.31 0.06 0.24 0.14 0.09

Quarterly revenue is flattish and we are concerned that EPS has been falling off every quarter after June 2012. We’ll have to skip Hyatt…

Marriott International, Inc. (NYSE:MAR): Current Price $41.16

Fiscal Year 2007 2008 2009 2010 2011
Revenue ($) in millions 12,990 12,880 10,910 11,690 12,320
Diluted EPS ($) 1.73 1.01 -0.97 1.21 0.55

Annual growth in revenue has certainly improved in 2010 and 2011, though earnings have taken a hit in 2011.

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Sep. 30, 2011 Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012
Revenue ($) in millions 2,874 3,693 2,552 2,776 2,729
Diluted EPS ($) -0.52 0.44 0.30 0.42 0.44

We would have liked to see revenue grow faster at Marriot, but are happy that EPS has grown in both the last two quarters. Marriot stays on our radar…

Starwood Hotels & Resorts Worldwide Inc. (NYSE:HOT): Current Price $62.21

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 5,754 4,696 5,071 5,624 6,321
Diluted EPS ($) 1.77 0.41 2.51 2.51 2.86

Starwood Hotels has grown sales rather well between 2009 and 2012. EPS, too, has grown impressively.

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012
Revenue ($) in millions 1,531 1,715 1,618 1,455 1,533
Diluted EPS ($) 0.85 0.65 0.62 0.87 0.72

Quarterly revenue is somewhat inconsistent, though EPS shows an upward bias. However, we’ll have to drop Starwood because its EPS dipped in the last quarter…

Intercontinental Hotels Group plc (NYSE:IHG): Current Price $30.13

Fiscal Year 2007 2008 2009 2010 2011
Revenue ($) in millions 1,767 1,854 1,538 1,628 1,768
Diluted EPS ($) 1.500 0.9536 0.7715 1.061 1.661

Business has certainly turned around at Intercontinental after 2009, and both sales and EPS have risen sharply into 2011.

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Sep. 30, 2011 Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012
Revenue ($) in millions 467.00 451.00 409.00 469.00 473.00
Diluted EPS ($) 0.6429 0.45 0.5572 0.4393 0.59

The latest two quarters at Intercontinental show marginally better sales and EPS. We’ll keep this hotel in our reckoning…

Wyndham Worldwide (NYSE:WYN): Current Price $58.83

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 4,281 3,750 3,851 4,254 4,534
Diluted EPS ($) -6.05 1.61 2.05 2.51 2.75

These annual numbers from Wyndham certainly inspire confidence. After 2009, this hotel chain upped both revenue and EPS.

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012
Revenue ($) in millions 1,000 1,036 1,139 1,265 1,094
Diluted EPS ($) 0.35 0.21 0.88 1.11 0.57

However, we see that though things were humming along nicely until the September 2012 quarter, Wyndham stumbled in December 2012. Both revenue and EPS took substantial hits, and we have to pass on this company.

Conclusion

Only Marriot and Intercontinental make it to the finishing line in thisĀ ”E-Squared” investment analysis of hotels, but Intercontinental breasts the tape due to its superior earnings record.

“E = Earnings Are Increasing Quarter-Over-Quarter” is a core component of our successful CHEAT SHEET investing framework. Don’t waste another minute – click here to discover our CHEAT SHEET stock picks now!