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IHG Hotels & Resorts (IHG - Free Report) made it through 2020 and is hoping for a global recovery in 2021. This Zacks Rank #5 (Strong Sell) is expected to see a triple digit earnings rebound this year.
IHG Hotels & Resorts operates 16 hotel brands and one of the world's largest hotel loyalty programs. Headquartered in Great Britain, it has nearly 6,000 hotels in 100 countries including brands such as Six Senses Hotels Resorts Spas, Kimpton Hotels, Hotel Indigo and Holiday Inn Hotels & Resorts.
It continues to expand, even during the global pandemic, and looks to open another 1,800 hotels over the next 5 years.
Preliminary Full Year Results Are Out
On Feb 23, IHG released its preliminary full year results for 2020.
Total gross revenue fell 52% to $13.5 billion as the coronavirus pandemic hit the travel and hospitality industry hard.
Full Year RevPAR fell 52.5% but it depended on where there were outbreaks and restrictions.
It saw the best recovery by the fourth quarter in Greater China, which had Q4 RevPar down "only" 18.2% while the Americas were still at 49.5% and EMEAA was down 70.5%.
Despite the pandemic, it opened 285 hotels during the year.
They are building avid and Atwell Suites to be future brands of scale, while also continuing to drive the growth of their established brands
It saw strong performances for Hotel Indigo and Kimpton, and the Holiday Inn Brand Family accounted for 60% of all openings and half of all signings in 2020.
Balance Sheet
For the year, the company managed to eke out free cash inflow of $29 million, with an inflow in the second half of the year.
Total available liquidity was $2.1 billion (on pro forma basis for repayment of £600m UK Government CCFF at March 2021 maturity).
It did not pay a dividend to shareholders in 2020.
Full Year Estimates Fall
Why is it a #5 (Strong Sell)?
The analysts are less confident about the earnings outlook for 2021.
One estimate has been revised higher for 2021 in the last week, but it wasn't enough to reverse the slide in the Zacks Consensus which fell to $1.07 from $1.36 over the last 60 days.
It seems the analysts got a little too optimistic about 2021 even though that is still earnings growth of 245% as IHG is expected to make just $0.31 in 2020.
For comparison purposes, in the pre-COVID world in 2019, IHG made $3.01 per share.
Further recovery is expected in 2022, with earnings expected to rise to $2.59, growth of 142%. But the Zacks Consensus for 2022 has also fallen over the last 7 days, from $2.70 to $2.59.
Is the Reopen Priced In?
Shares have rallied 40% in the last year and are close to pre-pandemic highs.
Given the drop in earnings, they now trade with a forward P/E of 67.
They aren't exactly cheap.
Has the Street already priced in the upcoming recovery in the travel sector?
But all three of them are also seeing earnings estimate cuts for 2021.
They are all Zacks Rank #4 (Sell) Stocks.
Investors might want to wait on the sidelines in the hotel industry to see how the recovery shakes out later this year.
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Image: Bigstock
Bear of the Day: IHG Hotels & Resorts (IHG)
IHG Hotels & Resorts (IHG - Free Report) made it through 2020 and is hoping for a global recovery in 2021. This Zacks Rank #5 (Strong Sell) is expected to see a triple digit earnings rebound this year.
IHG Hotels & Resorts operates 16 hotel brands and one of the world's largest hotel loyalty programs. Headquartered in Great Britain, it has nearly 6,000 hotels in 100 countries including brands such as Six Senses Hotels Resorts Spas, Kimpton Hotels, Hotel Indigo and Holiday Inn Hotels & Resorts.
It continues to expand, even during the global pandemic, and looks to open another 1,800 hotels over the next 5 years.
Preliminary Full Year Results Are Out
On Feb 23, IHG released its preliminary full year results for 2020.
Total gross revenue fell 52% to $13.5 billion as the coronavirus pandemic hit the travel and hospitality industry hard.
Full Year RevPAR fell 52.5% but it depended on where there were outbreaks and restrictions.
It saw the best recovery by the fourth quarter in Greater China, which had Q4 RevPar down "only" 18.2% while the Americas were still at 49.5% and EMEAA was down 70.5%.
Despite the pandemic, it opened 285 hotels during the year.
They are building avid and Atwell Suites to be future brands of scale, while also continuing to drive the growth of their established brands
It saw strong performances for Hotel Indigo and Kimpton, and the Holiday Inn Brand Family accounted for 60% of all openings and half of all signings in 2020.
Balance Sheet
For the year, the company managed to eke out free cash inflow of $29 million, with an inflow in the second half of the year.
Total available liquidity was $2.1 billion (on pro forma basis for repayment of £600m UK Government CCFF at March 2021 maturity).
It did not pay a dividend to shareholders in 2020.
Full Year Estimates Fall
Why is it a #5 (Strong Sell)?
The analysts are less confident about the earnings outlook for 2021.
One estimate has been revised higher for 2021 in the last week, but it wasn't enough to reverse the slide in the Zacks Consensus which fell to $1.07 from $1.36 over the last 60 days.
It seems the analysts got a little too optimistic about 2021 even though that is still earnings growth of 245% as IHG is expected to make just $0.31 in 2020.
For comparison purposes, in the pre-COVID world in 2019, IHG made $3.01 per share.
Further recovery is expected in 2022, with earnings expected to rise to $2.59, growth of 142%. But the Zacks Consensus for 2022 has also fallen over the last 7 days, from $2.70 to $2.59.
Is the Reopen Priced In?
Shares have rallied 40% in the last year and are close to pre-pandemic highs.
Given the drop in earnings, they now trade with a forward P/E of 67.
They aren't exactly cheap.
Has the Street already priced in the upcoming recovery in the travel sector?
Competitors Hyatt (H - Free Report) , Hilton (HLT - Free Report) and Marriott (MAR - Free Report) have also seen their stocks rally off the 2020 lows.
But all three of them are also seeing earnings estimate cuts for 2021.
They are all Zacks Rank #4 (Sell) Stocks.
Investors might want to wait on the sidelines in the hotel industry to see how the recovery shakes out later this year.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
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