It has been about a month since the last earnings report for Hyatt Hotels (H - Free Report) . Shares have lost about 6.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Hyatt Hotels due for a breakout? 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 Earnings & Revenues Drive Past Estimates in Q1
Hyatt Hotels reported better-than-expected results in the first quarter of 2019. With this, the bottom line exceeded the consensus mark for 13 straight quarters while the top line surpassed estimates after missing the same for the fourth consecutive quarter.
Adjusted earnings of 45 cents per share outpaced the Zacks Consensus Estimate of 21 cents. In the prior-year quarter, the company reported earnings of 33 cents per share. Total revenues were $1,241 million, which increased 11.9% from the prior-year quarter figure and beat the consensus estimate by 9.3%.
In the reported quarter, comparable system-wide revenues per available room (RevPAR) increased 1.8%, taking into account a 2.7% increase of the same at comparable owned and leased hotels. However, comparable U.S. hotel RevPAR fell 0.3%. While full-service hotel RevPAR was up 0.1%, that of select service hotel declined 1.3%.
Net income decreased 84.6% to $63 million in the first quarter. Meanwhile, adjusted EBITDA decreased 7.3% to $187 million (down 6.1% in constant currency). Adjusted EBITDA margin declined 220 basis points (bps) to 28.5%.
Meanwhile, comparable owned and leased hotels’ operating margin expanded 120 basis points to 24.7%.
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 at Owned and Leased Hotels totaled $458 million, down 9.6% from the year-ago quarter number. Comparable owned and leased hotels RevPAR increased 2.7%. ADR increased 3.4% and occupancy declined 50 bps from a year ago. On the flip side, adjusted EBITDA decreased 10%. At a constant currency, the same declined 9.3% due to transaction activities.
Revenues at Americas Management and Franchising summed $139 million, reflecting a 40.8% increase from the year-ago figure and 41.4% rise at a constant currency. RevPAR for comparable Americas full-service hotels increased 3.1%. While ADR climbed 3.4%, occupancy decreased 30 bps from the year-ago quarter number.
Meanwhile, RevPAR for comparable Americas select-service hotels was down 1.5%. While occupancy decreased 90 bps, ADR declined 0.2% in the quarter under review. Adjusted EBITDA increased 5.3% (up 5.8% in a constant currency) to $92 million.
Revenues at ASPAC Management and Franchising rose 6.2% year over year (up 10.2% in a constant currency) to $32 million.
RevPAR for comparable ASPAC full-service hotels increased 1.2%. Moreover, occupancy rose 80 bps but ADR was flat in the quarter. Adjusted EBITDA increased 6.5% (up 11.9% at constant currency) to $20 million.
Revenues at EAME/SW Asia Management and Franchising remained flat at $18 million.
Comparable EAME/SW Asia full-service hotels’ RevPAR increased 3%. ADR decreased 0.8% and occupancy rose 260 bps. Adjusted EBITDA increased 0.8% (up 7.3% at a constant currency) to $10 million.
As of Mar 31, 2019, Hyatt reported cash and cash equivalents of $547million. The total debt was $1.8 billion as of Mar 31, 2019. During the first quarter of 2019, Hyatt repurchased 1,452,858 Class A shares for $102 million. It ended the first quarter with 38,401,176 Class An and 67,115,828 Class B shares issued and outstanding.
For 2019, Hyatt expects net income of $144-183 million, up from the earlier $109-$147 million. The company continues to expect adjusted EBITDA of $780-$800 million. Comparable system-wide RevPAR is still anticipated to increase 1-3% year over year. On a net-rooms basis, Hyatt continues to expect unit growth of roughly 7-7.5%, reflecting 80 new hotel openings.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -13.92% due to these changes.
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 D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly 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.