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Hyatt's (H) Earnings Beat, Revenues Miss Estimates in Q2

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Hyatt Hotels Corporation (H - Free Report) posted mixed results in the second quarter of 2018, wherein earnings surpassed the Zacks Consensus Estimate while revenues lagged the same.

Adjusted earnings of 72 cents per share beat the consensus estimate of 48 cents by 50%. Earnings grew 41.2% year over year on higher EBITDA margins.

Total revenues of $1.13 billion declined 1.4% from the prior-year quarter, due to lower contribution from owned and leased hotels.  Revenues also missed the consensus estimate of $1.14 billion by nearly 1%.

Shares fell a meager 0.9% in after-hours trading, following the earnings release. However, Hyatt’s stock has rallied 39.2% in the past year, outperforming the industry’s collective growth of 4.8%.


RevPAR Details

In the reported quarter, comparable system-wide revenues per available room(RevPAR) increased 4%, taking into account an increase of 4.1% at comparable owned and leased hotels. Excluding the effect of Easter holiday timings,both comparable system-wide RevPAR, and comparable owned and leased RevPAR moved up 3.7%.

Comparable U.S. hotel RevPAR increased 3.4%. Full-service hotel RevPAR rose 4% and that of select service hotel grew 2.1%. Excluding the impact of Easter holiday timing, comparable U.S. hotel RevPAR increased 3%, with full and select service hotel RevPAR increasing 3.4% and 2.1%, respectively.

Hyatt Hotels Corporation Price, Consensus and EPS Surprise

 

Operating Highlights

In the second quarter, net income decreased 24.6% to $77 million. Adjusted EBITDA declined 2.7% to $218 million (down 3.1% in constant currency). Adjusted EBITDA margin, however, increased 280 basis points (bps) to 34.2%.

Comparable owned and leased hotels operating margin increased 160 basis points to 27.2%.

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 from Owned and Leased Hotels were $478 million, down 15.8% (16.4% in a constant currency) from the year-ago figure.

In constant currency, comparable owned and leased hotels RevPAR increased 4.1%. ADR increased 2.8% and occupancy rose 100 bps from a year ago.

Adjusted EBITDA decreased 12.1% to $120 million. At a constant currency, the same declined 12.2% due to transaction activities.

Revenues at Americas Management and Franchising were $108 million, reflecting an increase of 2.6% from the year-ago figure and 2.8% rise at a constant currency.

RevPARfor comparable Americas full-service hotels increased 4%. ADR climbed 3.1% at a constant currency and occupancy increased 70 bps from the year-ago quarter.

Meanwhile, RevPAR for comparable Americas select-service hotels rose 2.6%. Occupancy increased 40bps and ADR improved 2.2%.

Adjusted EBITDA increased 4.2% (up 4.3% in a constant currency) to $96 million.

Revenues at ASPAC Management and Franchising rose 11.7% year over year (up 7.8% in a constant currency) to $30 million.

RevPAR for comparable ASPAC full-service hotels increased 4.2%, driven by increased occupancy across regions, particularly greater China. Notably, occupancy rose 220 bps and ADR climbed 1.1% in the quarter under review.

Adjusted EBITDA increased 6.6% (up 1.8% at constant currency) to $18 million.

Revenues at EAME/SW Asia Management and Franchising increased 20.6% (19.8% in a constant currency) year over year to $19 million.

Comparable EAME/SW Asiafull-service hotels’ RevPAR moved up 6.5%, driven by growth in Russia, France and Switzerland. ADR increased 2.9% and occupancy rose 230 bps.

Adjusted EBITDA increased 50.3% (up 48.4% at a constant currency) to $11 million.

Balance Sheet

As of Jun 30, 2018, Hyatt reported cash and cash equivalents of $628 million, including investments in highly-rated money market funds and similar investments, up from $503 million at the end of 2017.

The total debt was $1.4 billion as of Jun 30, 2018, nearly unchanged from that of 2017 end.

During the second quarter of 2018, the company repurchased $513 million shares of its common stock. Hyatt’s board of directors has declared a cash dividend of 15 cents per share for the third quarter of 2018. The dividend is payable on Sep 20, 2018, to Class A and Class B shareholders of record as of Sep 6, 2018.

2018 Guidance

The company expects net income of $508-550 million compared with the previously guided $495-$553 million. Capital expenditure is expected to be approximately $375 million for 2018, same as the previous guidance. Adjusted EBITDA is expected to be $775-$785 million, higher than the previous guidance of $765-$785 million.

Comparable system-wide RevPAR is anticipated to increase 3-4% year over year. Earlier, the company expected 2-3.5% growth for the same.

The company continues to expect unit growth, on a net rooms basis, by roughly 6.5-7% (compared with the prior guidance of 6-6.5%), reflecting 60 new hotel openings. It now expects to return roughly $800 million to its shareholders through a combination of cash dividends on its common stock and share repurchases.

Zacks Rank & Peer Releases

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

Extended Stay America (STAY - Free Report) reported better-than-expected earnings for the third straight quarter when it posted second-quarter 2018 financial numbers. Adjusted earnings were 35 cents per share, outpacing the Zacks Consensus Estimate of 34 cents. The bottom line also grew 12.9% year over year, backed by a decrease in effective tax rate and lower depreciation expenses.

Hilton (HLT - Free Report) reported mixed results for the second quarter of 2018, wherein earnings met analysts’ expectations while revenues lagged. Markedly, after posting earnings beat for six straight quarters, Hilton’s adjusted earnings of 70 cents per share in the second quarter met the Zacks Consensus Estimate. Earnings increased 37% year over year.

Upcoming Peer Release

Marriott (MAR - Free Report) is slated to report second-quarter 2018 earnings on Aug 6, after the market closes. The consensus estimate for Marriott’s second-quarter earnings is pegged at $1.36 per share, suggesting an increase of 20.4% from the year-ago quarter.

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