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Hyatt Hotels (H) Up 15.2% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Hyatt Hotels (H - Free Report) . Shares have added about 15.2% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Hyatt Hotels due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Hyatt Q2 Earnings & Revenues Miss Estimates, Fall Y/Y

Hyatt reported dismal second-quarter 2020 results, wherein earnings and revenues not only missed the Zacks Consensus Estimate but also declined sharply on a year-over-year basis.

The company reported adjusted loss per share of $1.80, wider than the Zacks Consensus Estimate of a loss of $1.38. In the prior-year quarter, the company had reported adjusted earnings per share of 76 cents.

Quarterly revenues of $250 million missed the consensus mark of $251 million by 0.2%. The top line also declined 80.6% from the year-ago quarter.

Operating Highlights

Adjusted EBITDA slumped 154.6% to $117 million (down 155.2% at constant currency). Moreover, adjusted EBITDA declined 274.6% in the second quarter against 31.6% growth in the year-ago quarter.

Segmental Details

Hyatt manages business through four reportable segments — Owned and Leased Hotels; Americas Management and Franchising; Southeast Asia, Greater China, Australia, South Korea, Japan and Micronesia (ASPAC) Management and Franchising; and Europe, Africa, Middle East and Southwest Asia (EAME/SW Asia) Management and Franchising.

Revenues at Owned and Leased Hotels totaled $20 million, down 95.9% from the year-ago quarter number. The sharp decline can primarily be attributed to the impact of coronavirus on comparable owned and leased hotels as well as dispositions. Owned and leased hotels RevPAR declined 97.4% in the quarter. While ADR was down 32.6%, occupancy rate declined 75 percentage points during the second quarter.

Meanwhile, adjusted EBITDA decreased 168.2% to ($78) million. At constant currency, the same declined 168.6%.

Revenues at Americas Management and Franchising amounted to $10 million, reflecting a decline of 92.5% and 92.4% from the year-ago figure and constant currency, respectively.

RevPAR for comparable Americas full-service hotels decreased 95.7%. While ADR declined 35.4%, occupancy rates fell 74 percentage points from the year-ago quarter number.

Meanwhile, RevPAR for comparable Americas select-service hotels was down 81.2%. While ADR declined 31.1%, occupancy rates decreased 57.7 percentage points from the year-ago quarter number.

Adjusted EBITDA fell 103% (as well as in constant currency) to ($3) million.

Revenues at ASPAC Management and Franchising decreased 81.8% year over year (down 81.5% at constant currency) to $6 million.

RevPAR for comparable ASPAC full-service hotels declined 79.1%. While ADR declined 36.4%, occupancy rates decreased 49 percentage points from the year-ago quarter number.

Meanwhile, RevPAR for comparable Americas select-service hotels was down 58%. Occupancy and ADR declined 32.3 percentage points and 18.4%, respectively, in the quarter under review.

Adjusted EBITDA were down 108.3% (down 108.5% at constant currency) to ($2) million.

Revenues at EAME/SW Asia Management and Franchising were down 90.4% to $2 million.

Comparable EAME/SW Asia full-service hotels’ RevPAR decreased 93.9% on account of suspension of hotel operation owing to the COVID-19 crisis. While ADR decreased 35.4%, occupancy rates declined 60.6 percentage points during the quarter.

Adjusted EBITDA decreased 201.4% (down 208.5% at constant currency) to ($11) million.]

Balance Sheet

As of Jun 30, 2020, Hyatt reported cash and cash equivalents (including investments in highly-rated money market funds and similar investments) of $1,438 million. The total debt was $2,500 million as of Jun 30, 2020.

The company ended the second quarter with 38,114,681 Class A and 63,028,031 Class B shares issued as well as outstanding. Notably, the company suspended all share repurchase activity effective Mar 3, 2020, and suspended its quarterly dividend through the first quarter of 2021.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -22.58% due to these changes.

VGM Scores

Currently, Hyatt Hotels has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Hyatt Hotels has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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