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Hyatt Hotels (H) Tops Q4 Earnings & Revenues, Margins Fall

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Hyatt Hotels Corporation H posted better-than-expected results for the fourth quarter of 2017, wherein both earnings and revenues surpassed the Zacks Consensus Estimate.

Adjusted earnings of 23 cents per share beat the consensus estimate of 19 cents by 21.1%. Earnings, however, fell 20.7% year over year, reflecting a pressure in the quarter’s EBITDA margin.

Total revenues of $1.2 billion rose 8.9% year over year on the back of higher management and franchise fees, partially offset by lower contribution from owned and leased hotels. The top line also surpassed the consensus estimate of $1.1 billion by 9.1%.

Hyatt Hotels Corporation Price, Consensus and EPS Surprise

Shares barely moved in after-hours trading following the earnings release. However, Hyatt’s stock rallied 43.6% in the past year, outperforming the industry’s gain of 40.3%.

The company’s aggressive expansion strategies in both domestic and international markets are reflected in its top-line growth. However, comparable owned and leased margin contraction affected the bottom line.

RevPAR Details

In the quarter, comparable system-wide revenues per available room(RevPAR) increased 3.8%, taking into account an increase of 4.1% at comparable owned and leased hotels. Excluding the benefit of Jewish holiday timings, comparable system-wide RevPAR increased 3.2% and comparable owned and leased RevPAR inched up 3%.

Comparable U.S. hotel RevPAR increased 3%. Full-service hotel RevPAR rose 2.9%, while select service hotel RevPAR grew 3.2%.

Operating Highlights

For the fourth quarter, net income increased 87.4% to $76 million. Adjusted EBITDA increased 4% to $179 million and 3% in constant currency. Adjusted EBITDA margin decreased 20 basis points to 26.7%.

Comparable owned and leased hotels operating margin increased 150 basis points to 23.7%.

Segment Details

Hyatt manages its 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.

Owned and Leased Hotels revenues were $512 million, down 2.5% from the year-ago figure. Revenues declined 3.6% in constant currency.

Comparable owned and leased hotels RevPAR increased 5.4% (up 4.1% at constant currency). ADR increased 2.4% in constant currency and occupancy rose 120 bps from a year ago.

Adjusted EBITDA decreased 8.1% to $107 million. At constant currency, the same declined 8.8% due to transaction activities, partially offset by benefits related to the timing of the Jewish holiday.

Revenues at Americas Management and Franchising were $95 million, reflecting an increase of 5.2% from the year-ago figure and a 5.1% rise at constant currency.

RevPARfor comparable Americas fullservice hotels increased 3.4% (and 3.3% on a constant currency basis). While ADR climbed 1.7% at constant currency, occupancy increased 110 bps from the year-ago quarter.

Meanwhile, RevPAR for comparable Americas select-service hotels rose 4.5% as reported and on a constant currency basis. While occupancy increased 170 bps, ADR improved 2.1% at constant currency.

Adjusted EBITDA increased 6.5% (up 6.3% in constant currency) to $81 million.

Revenues at ASPAC Management and Franchising rose 16.7% year over year (up 15% in constant currency) to $33 million.

RevPAR for comparable ASPAC full-service hotels increased 5.8% (up 4.3% at constant currency) driven by strong RevPAR growth in Greater China and Southeast Asia. Notably, occupancy rose 180 bps and ADR climbed 1.8% at constant currency in the quarter under review.

Adjusted EBITDA increased 17.9% (up 15.7% at constant currency) to $22 million.

Revenues at EAME/SW Asia Management and Franchising increased 15.8% (12.4% in constant currency) year over year to $21 million.

Comparable EAME/SW Asiafull-service hotels’ RevPAR increased 7.8% (3.8% at constant currency) driven by growth in most European markets, partially offset by weak performance in the Middle East. ADR increased 0.7% at constant currency and occupancy rose 200 bps.

RevPAR for comparable EAME/SW Asia select-service hotels rose 9% (up 5% at constant currency). Occupancy increased 300 bps and ADR inched up 0.7% at constant currency.

Adjusted EBITDA increased 36.9% (up 31.7% at constant currency) to $12 million.

Balance Sheet

As of Dec 31, 2017, Hyatt reported cash and cash equivalents including investments in highly rated money market funds and similar investments, of $503 million, up from $482 million at the end of 2016.

Total debt was $1.5 billion as of Dec 31, 2017 compared with $1.6 billion in 2016.

The company repurchased 12.2 billion shares of common stock for $723 million in 2017 compared with 5.6 billion shares for $272 million in 2016.

2017 Results

In 2017, net income increased 22.3% to $249 million. Comparable systemwide RevPAR increased 3.3%, which also includes an increase of 0.9% at comparable owned and leased hotels. Comparable U.S. hotel RevPAR increased 2.2%; full service and select service hotel RevPAR increased 2.1% and 2.4%, respectively.

Comparable owned and leased hotels operating margin decreased 20 bps to 24.3%. Adjusted EBITDA margin decreased 70 bps to 29.5%

2018 Guidance

The company expects net income to grow in the range of $176-$215 million in 2018. Capital expenditures are expected to be approximately $350 million in the year. Adjusted EBITDA is expected within $805-$825 million.

Comparable systemwide RevPAR is anticipated to increase 1-3% in 2018.

The company expects to grow units, on a net rooms basis, by roughly 6% to 6.5%, reflecting 60 new hotel openings. It also expects to return at least $300 million to shareholders through a combination of cash dividends on its common stock and share repurchases.

Zacks Rank & Peer Releases

Hyatt carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Wyndham WYN reported fourth-quarter adjusted earnings per share of $1.49, beating the Zacks Consensus Estimate by 10.4%. Moreover, the bottom line was up 9.6% year over year on the back of higher revenues and a share repurchase program. 

Hilton HLT reported fourth-quarter adjusted earnings per share of 54 cents, beating the Zacks Consensus Estimate by 10 cents but decreased 22.9% year over year.

Upcoming Peer Release

Extended Stay America (STAY - Free Report) is slated to report third-quarter 2017 results on Feb 27, before market open. The Zacks Consensus Estimate for current-quarter earnings is pegged at 17 cents, reflecting a 15% year-over-year decline.

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