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Hyatt (H) Announces Share Buybacks, Discusses Asset Sales

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Hyatt Hotels Corporation (H - Free Report) recently announced that its board of directors has raised its share repurchase authorization. In the same press release, the company discussed the sale of Hyatt Regency Monterey Hotel and Spa and, Avendra LLC.

Enhancing Shareholder Value Doesn’t Indicate Lower Investment Opportunities 

Hyatt’s board has approved the repurchase of up to an additional $750 million shares. Including the latest authorization, the company has approximately $864 million shares left to be repurchased under its existing repurchase authorization. It repurchased shares worth $700 million between Jan 1 and Nov 15, 2017.

However, the company is not rewarding shareholders at the expense of business expansion. It has a solid cash position to explore profitable avenues too. The company continues to focus on investing in brand and sales building.

In fact, recently Hyatt opened its first joint development hotel in Japan and is also set to double its Africa footprint by 2020.

Asset Sale Improves Cash Position

On Nov 9, Hyatt sold its 550-rommed Hyatt Regency Monterey Hotel and Spa for approximately $60 million. This resulted in a pre-tax gain of approximately $17 million. Notably, this property sale was one of the six asset sales planned by the company. Also, it will remain under a long-term franchise agreement within the Hyatt system.

Hyatt also received net cash proceeds of approximately $217 million in Dec 11 from the sale of Avendra to Aramark Corporation. The asset sale fetched the company approximately $20 million in equity earnings from unconsolidated hospitality ventures.

We note that these sales are in line with Hyatt’s efforts to strengthen its financial flexibility and focus more on core operation. The sale of assets is helping the company grow through management and licensing arrangements, instead of direct ownership of selective assets. However, Hyatt continues to manage the properties post sale. Notably, a higher concentration of franchise fees reduces earnings volatility and provides a more stable growth profile.

Additionally, asset sales are helping Hyatt in terms of strengthening its liquidity. This also allows the company to protect its current liabilities with a combination of cash and liquid assets.

The strategic decisions have helped the company’s shares rally 27.3% year to date, outperforming the industry’s gain of 20.8%.

 

Hyatt currently carries a Zacks Rank #3 (Hold).  

Stocks to Consider

A few better-ranked stocks in the industry include Marriott International (MAR - Free Report) , Hilton Worldwide Holdings (HLT - Free Report) and Choice Hotels International (CHH - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth rates for Marriott, Hilton and Choice Hotels are projected at 9.4%, 5% and 8.4%, respectively.

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