A month has gone by since the last earnings report for Hyatt Hotels (H - Free Report) . Shares have added about 4.4% 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’s Earnings Beat, Revenues Miss Estimates in Q3
Hyatt 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.
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%.
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 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.
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 An and Class B shareholders of record as of Nov 28, 2018.
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 room 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.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
At this time, Hyatt Hotels has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Hyatt Hotels has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.