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Bear of the Day: Hyatt Hotels Corporation (H)

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Hyatt Hotels Corporation (H - Free Report) shares had been largely outpacing the broader market over the last several years. Then the coronavirus brought the entire travel and leisure industry to as close to a complete halt as possible.

Even as the economy starts to turn around and consumer spending bounces back, the hotel and travel industry remains largely devastated, for now.

Vacancy…

Hyatt’s first quarter revenue fell 20%, as the virus didn’t really begin to interrupt travel for business and pleasure until early March. The company’s second quarter sales then tumbled 80% from the year-ago period, as the pandemic crushed the entire travel sector. Meanwhile, it posted an adjusted loss of -$1.80 per share.            

Hyatt fell short of both our Zacks earnings and revenue estimates in early August. Luckily for Hyatt and the broader industry, there have been signs of a slow recovery. “We are encouraged by the demand progression we have seen in China and also in certain markets in the U.S. and other parts of the world,” CEO Mark Hoplamazian said in prepared Q2 remarks.

“Our teams are prepared for varied recovery scenarios sustained by continuously evolving new ways of operating that reduce the occupancy levels that are required to break even at the hotel operating level.”

 

 

 

 

 

 

 

 

 

 

Outlook

Zacks estimates call for Hyatt’s adjusted earnings to sink from +$0.37 in the year-ago period to a loss of -$1.22 per share in the third quarter.

Meanwhile, its sales are projected to sink 62% in Q3 and 52% in the fourth quarter. This marks a positive trend and might be better than some investors would have thought given the current industry conditions.

Overall, its full-year FY20 revenue is projected to fall 53% to $2.34 billion. Peeking ahead to FY21, the hotel giant’s sales are projected to climb 56% above our current-year outlook, which would still come in far below FY19’s figure.

On the bottom end, Hyatt is expected to post adjusted losses of -$4.38 per share this year and -$1.95 in FY21.

 

 

 

 

 

 

 

 

 

 

Bottom Line

Hyatt closed regular trading Friday around 40% off its 52-week highs. And the nearby chart highlights how much worse Hyatt’s earnings outlook appears. This negative revision activity helps Hyatt earn a Zacks Rank #5 (Strong Sell) right now. H stock also sports a “D” grade for Value and “F” grades for Growth and Momentum in our Style Scores system, while its Hotels and Motels space rests near the bottom of our over 250 Zacks industries.

On top of that, Hyatt has temporarily suspended its share repurchase program and its dividend. Therefore, investors might want to hold off on the stock until there are more signs that the industry is ready for a turnaround.

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