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Hyatt (H) Stock Gains on Q3 Earnings Beat, Raised 2017 View

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

Additionally, the company raised its guidance for full-year 2017. Consequently, shares were up more than 6% in yesterday’s trading session.

Earnings and Revenues Discussion

Adjusted earnings of 26 cents per share beat the Zacks Consensus Estimate of 17 cents by 52.9%. However, earnings were down 44.7% year over year from 47 cents, thanks to the impact of natural disasters and the Jewish Holiday timing.      

Net revenues of $1.12 billion rose 2.8% year over year on the back higher management and franchise fees, increased other revenues as well as improved other revenues from managed properties, partially offset by lower contribution from owned and leased hotels. The top line also surpassed the Zacks Consensus Estimate of $1.09 billion by more than 2%.

Hyatt Hotels Corporation Price, Consensus and EPS Surprise

 

 

Inside the Headline Numbers

Notably, management and franchise fee revenues increased 12.2% (11.9% in constant currency) to $122 million driven by hotel openings and enhanced performance of existing ones.

In the quarter, comparable system-wide revenue per available room (RevPAR) increased 1.6%, taking into account a decrease of 1.1% at comparable owned and leased hotels. However, excluding the impact of natural disaster and Jewish holiday timings, comparable system wide RevPAR increased 2.6% and comparable owned and leased RevPAR inched up 0.5%.

Comparable U.S. hotel RevPAR declined 0.1%. Full service hotel RevPAR dropped 1.3%, while select service hotel RevPAR grew 1.4%. Excluding the impact of natural disaster and Jewish holiday timings, comparable U.S. hotel RevPAR increased 1.3%. Full service and select service hotel RevPAR grew 1.2% and 1.7%, respectively.

Adjusted EBITDA (earnings before interest, taxes, and amortization) decreased 6.2% year over year to $180 million. At constant currency, the same declined 6.7%. However, adjusted EBITDA margin fell 260 basis points (bps) to 27.5% at constant currency.

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 $505 million, down 2.7% from the year-ago figure (down 3.2% at constant currency).

Comparable owned and leased hotels RevPAR declined 0.5% (down 1.1% at constant currency). While ADR increased 1% at constant currency, occupancy declined 160 bps from a year ago.

Adjusted EBITDA decreased 13.8% to $104 million. At constant currency, the same declined 14.3% due to the lapping of the 2016 Olympic Games, transaction activity, natural disasters and the shift in the Jewish holiday timing.

Revenues at Americas Management and Franchising were $95 million, reflecting an increase of 5.9% from the year-ago figure and a 5.7% rise at constant currency.

RevPAR for comparable Americas full -service hotels dropped 0.1% (down 0.3% on a constant currency basis). While ADR climbed 0.2% at constant currency, occupancy fell 30 bps from the year-ago quarter.

Meanwhile, RevPAR for comparable Americas select-service hotels rose 1.7% as reported and on a constant currency basis. While occupancy increased 110 bps, ADR improved 0.4% at constant currency.

Adjusted EBITDA increased 6.8% (up 6.5% in constant currency) to $82 million.

Revenues at ASPAC Management and Franchising rose 17.8% year over year (up 18.8% in constant currency) to $27 million.

RevPAR for comparable ASPAC full-service hotels increased 5% (up 6.3% at constant currency) driven by strong RevPAR growth in Greater China. Notably, occupancy rose 430 bps and ADR climbed 0.2% at constant currency in the quarter under review.

Adjusted EBITDA increased 19.9% (up 21.2% at constant currency) to $17 million.

Revenues at EAME/SW Asia Management and Franchising increased 18.6% (15.6% in constant currency) year over year to $18 million.

Comparable EAME/SW Asia full-service hotels’ RevPAR inched up 5.6% (3.5% increase at constant currency) driven by enhanced performance in Western Europe and Turkey. ADR increased 0.9% at constant currency and occupancy rose 160 bps.

RevPAR for comparable EAME/SW Asia select-service hotels rose 15% (up 11.6% at constant currency). Occupancy increased 630 bps and ADR inched up 2.6% at constant currency.

Adjusted EBITDA increased 41.3% (up 36.1% at constant currency) to $11 million.

2017 Guidance Raised

For 2017, the company projects net income in the range of $193 million to $210 million, up from the earlier range of $173 million to $201 million.

Hyatt now expects comparable system-wide RevPAR increase of roughly 2.5% to 3% year over year, better than the prior guidance of 1% to 3%. Meanwhile, adjusted EBITDA is anticipated at around $805 million to $815 million, compared to the previous expectation of $795 million to $815 million

Capital expenditures are anticipated to be roughly $300 million, compared with the prior projection of $350 million.

Meanwhile, the company expects the opening of at least 60 hotels in the current year, more optimistic than the prior guidance of roughly 60 hotels.

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

Peer Releases

Wyndham Worldwide Corporation WYN reported third-quarter adjusted earnings per share of $2.03, beating the Zacks Consensus Estimate of $2 by 1.5%. Moreover, the bottom line was up 7.4% year over year on the back of higher revenues and a share repurchase program.

In third-quarter 2017, Hilton Worldwide Holdings Inc. HLT posted adjusted earnings of 56 cents per share that outpaced the Zacks Consensus Estimate of 50 cents by 12%. Also, the bottom line rose 37% year over year primarily on higher revenues. In fact, earnings surpassed management’s guided range of 47 cents to 51 cents.

Upcoming Peer Release

Extended Stay America, Inc. STAY is slated to report third-quarter 2017 results on Nov 7, before market opens. The Zacks Consensus Estimate for current-quarter earnings is pegged at 38 cents, reflecting 5.1% year-over-year growth.

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