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Hyatt's (H) Q3 Earnings Surpass, Revenues Miss Estimates

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Hyatt Hotels Corporation (H - Free Report) posted mixed third-quarter 2018 results, wherein earnings surpassed the Zacks Consensus Estimate while revenues lagged the same. With this, the bottom line exceeded the consensus mark for 11 straight quarters, while the top line lagged the same for the third consecutive quarter.

Adjusted earnings of 33 cents per share outpaced the consensus estimate of 25 cents by 32%. The bottom line also grew 37.5% on a year-over-year basis. Total revenues of $1,074 million inched up 0.5% from the prior-year quarter figure but missed the consensus estimate of $1,092 million.

Following the quarterly results, shares of Hyatt increased a meager 0.1% in after-hours trading. In a year’s time, the stock has gained 6.3%, against the industry’s 18.6% decline.

RevPAR Details

In the reported quarter, comparable system-wide revenues per available room (RevPAR) increased 2.8%, taking into account an increase of 5.3% at comparable owned and leased hotels. Comparable U.S. hotel RevPAR rose 1.4%. While full-service hotel RevPAR rose 2.5%, that of select service hotel declined 1.1%.

Operating Highlights

Net income rose 8.2% to $237 million in the third quarter. Meanwhile, adjusted EBITDA declined 0.9% to $175 million (up 0.1% in constant currency). Adjusted EBITDA margin expanded 240 basis points (bps) to 29.7%.

Comparable owned and leased hotels operating margin expanded 70 basis points to 21.8%.

Hyatt Hotels Corporation Price, Consensus and EPS Surprise

 

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 totaled $443 million, down 13.3% (12.9% in a constant currency) from the year-ago figure. Comparable owned and leased hotels RevPAR increased 5.3%. ADR increased 2.8% and occupancy rose 190 bps from a year ago.

Adjusted EBITDA decreased 12.5% to $91 million. At a constant currency, the same declined 12.9% due to transaction activities.

Revenues from Americas Management and Franchising summed $95 million, reflecting an increase of 0.4% from the year-ago figure and a 0.8% rise at a constant currency.

RevPAR for comparable Americas full-service hotels increased 3%. ADR climbed 3.2% at a constant currency, while occupancy decreased 20 bps from the year-ago quarter number.

Meanwhile, RevPAR for comparable Americas select-service hotels was down 0.7%. While occupancy increased 180 bps, ADR improved 1.5% in the quarter under review.

Adjusted EBITDA increased 1% (up 1.5% in a constant currency) to $83 million.

Revenues at ASPAC Management and Franchising rose 11.4% year over year (up 13.2% in a constant currency) to $30 million.

RevPAR for comparable ASPAC full-service hotels increased 3%. However, occupancy dropped 20 bps but ADR climbed 3.2% in the quarter.

Adjusted EBITDA increased 15.9% (up 18.4% at constant currency) to $19 million.

Revenues at EAME/SW Asia Management and Franchising increased 17% (21.1% in a constant currency) year over year to $21 million.

Comparable EAME/SW Asia full-service hotels’ RevPAR climbed 11%, driven by growth in Russia, Turkey and Western Europe. ADR increased 5% and occupancy rose 360 bps.

Adjusted EBITDA increased 16% (up 21.1% at a constant currency) to $12 million.

Balance Sheet

As of Sep 30, 2018, Hyatt reported cash and cash equivalents of $1,014 million, up from $503 million at the end of 2017. The total debt was $1,633 million as of Sep 30, 2018.

During the third quarter of 2018, the company repurchased $66 million shares of its common stock. For the fourth quarter, Hyatt’s board of directors declared a cash dividend of 15 cents per share. The dividend is payable Dec 10, 2018, to Class A and Class B shareholders of record as of Nov 28, 2018.

2018 Guidance

For 2018, Hyatt expects net income of $726-$771 million compared with the previously guided $680-$629 million. Capital expenditures are expected to be approximately $325 million compared with $375 million guided earlier. The company continues to expect adjusted EBITDA in the range of $765-$775 million.

Comparable system-wide RevPAR is anticipated to increase 3.25-3.75% year over year. Earlier, the company expected 3-4% growth for the same.

On a net rooms basis, Hyatt continues to expect unit growth of roughly 6.5-7%, reflecting 60 new hotel openings. It now expects to return roughly $1 billion to its shareholders through a combination of cash dividends on its common stock and share repurchases.

Zacks Rank & Stocks to Consider

Hyatt has a Zacks Rank #3 (Hold). Better-ranked stocks in the same space include Belmond Ltd. (BEL - Free Report) , Marriott Vacations Worldwide Corporation (VAC - Free Report) and Peak Resorts, Inc. (SKIS - 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.

Belmond, Marriott Vacations Worldwide and Peak Resorts earnings in the current year is likely to witness a respective 58.3%, 24.2% and 342.9% growth year over year.

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