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Hyatt (H) Stock Up on Q2 Earnings Beat, Encouraging ’17 View

Zacks

Hyatt Hotels Corporation H posted mixed results for the second quarter of 2017, wherein though earnings surpassed the Zacks Consensus Estimate, revenues lagged the same.

Meanwhile, the company provided upbeat guidance for full-year 2017. Consequently, shares were up nearly 8% in yesterday’s trading session.

Earnings and Revenues Discussion

Adjusted earnings of 52 cents per share came above the Zacks Consensus Estimate of 35 cents by a significant 48.6%. However, the bottom line was down 18.8% year over year from the figure of 64 cents, given higher expenses.

Net revenues of $1.195 billion improved 2.6% year over year on the back of increased contribution from owned and leased hotels, better management and franchise fees as well as improved other revenues, partially offset by lower other revenues from managed properties. The top line, however, fell slightly short of the Zacks Consensus Estimate of $1.202 billion.

Hyatt Hotels Corporation Price, Consensus and EPS Surprise

Hyatt Hotels Corporation Price, Consensus and EPS Surprise | Hyatt Hotels Corporation Quote


Inside the Headline Numbers

Notably, management and franchise fees increased 12% (12.5% in constant currency) to $130 million on the back of new hotels.

In the quarter, comparable system-wide revenue per available room (RevPAR) increased 2.4%, up 2.9% in constant currency, driven by gains in both occupancy and in average daily rate (ADR).

Also, comparable U.S. hotel RevPAR increased 1.4%. Full service and select service hotel RevPAR too witnessed an increase of 1.3% and 1.5%, respectively.

Adjusted EBITDA (earnings before interest, taxes, and amortization) grew 0.6% year over year to $229 million on higher revenues. At constant currency, the same increased 1.3%. However, adjusted EBITDA margin decreased 140 basis points (bps) to 31.7% on a constant currency basis.

Segment Details

Hyatt manages its business within 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 $562 million, up 0.5% from the year-ago figure (up 1% in constant currency).

Comparable owned and leased hotels RevPAR declined 1.7%. At constant currency, total system-wide same store RevPAR decreased 1.2% year over year. While ADR decreased 0.3% (up 0.2% in constant currency), occupancy declined 110 bps.

Adjusted EBITDA decreased 8.5% to $136 million. At constant currency, the same declined 7.9%. The downturn was primarily due to disposition activity and weak group demand at full service hotels in the U.S., given the shift in Easter holiday timing.

Revenues at Americas Management and Franchising were $109 million, an increase of 9.2% from the year-ago figure as reported and in constant currency.

RevPAR for comparable Americas full-service hotels increased 1.4% (up 1.6% in constant currency), driven by a 20 bps growth in occupancy and 1.2% rise (1.4% rise in constant currency) in ADR. The shift of the Easter holiday to the second quarter of 2017 compared with the first quarter of 2016 hampered results.

Meanwhile, RevPAR for comparable Americas select-service hotels rose 1.8% as reported and on a constant currency basis. While occupancy increased 70 bps, ADR improved 1%.

Adjusted EBITDA increased 9.4% (up 9.5% in constant currency) to $97 million.

Revenues at ASPAC Management and Franchising rose 18.7% year over year (up 21.1% in constant currency) to $27 million.

RevPAR for comparable ASPAC full-service hotels witnessed an increase of 5.4% (up 7.2% in constant currency) driven by strong RevPAR growth in China. Notably, occupancy increased 590 bps. However, ADR declined 3.2% (down 1.6% in constant currency) in the quarter.

Adjusted EBITDA increased 33% (up 36.7% % in constant currency) to $16 million.

Revenues at EAME/SW Asia Management and Franchising increased 2.1% (up 2.7% in constant currency) year over year to $17 million.

Comparable EAME/SW Asia full-service hotels’ RevPAR inched up 3.3% (up 5.1% in constant currency). Though ADR decreased 1.9% (down 0.1% in constant currency), occupancy witnessed an improvement of 330 bps. Strength in the United Kingdom, Germany and India drove the quarter’s RevPAR, somewhat offset by continued weakness in Switzerland.

RevPAR for comparable EAME/SW Asia select-service hotels witnessed an increase of 16.9% (up 17.2% in constant currency). Occupancy increased 870 bps while ADR inched up 2.8% in the quarter (up 3% in constant currency).

Adjusted EBITDA increased 3.6% (up 4.2% in constant currency) to $9 million.

2017 Guidance Raised

For 2017, the company projects net income in the range of $173-$201 million, up from the earlier guided range of $123-$159 million.

Hyatt now expects comparable system-wide RevPAR to increase roughly in the range of 1-3% year over year, better than the prior guidance of flat to up 2%. Meanwhile, adjusted EBITDA is anticipated to be approximately in the band of $795 million-$815 million (earlier $769-$804 million).

Capital expenditures are now anticipated to be roughly $350 million compared with the prior expectation of $375 million.

Meanwhile, the company continues to expect opening of roughly 60 hotels in the current year.

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 second-quarter adjusted earnings per share of $1.53, beating the Zacks Consensus Estimate of $1.50 by 2%. Moreover, the bottom line was up 9.3% year over year on the back of higher revenues and the company’s share repurchase program.

In second-quarter 2017, Hilton Worldwide Holdings Inc. HLT posted adjusted earnings of 52 cents per share that outpaced the Zacks Consensus Estimate of 50 cents by 4%. Also, the bottom line soared 30% year over year primarily owing to higher revenues. In fact, the same came above management’s guided range of 47 cents to 51 cents.

Extended Stay America, Inc.’s STAY second-quarter 2017 adjusted earnings of 31 cents per share lagged the Zacks Consensus Estimate of 32 cents by 3.1%. Meanwhile, the figure remained flat on a year-over-year basis.

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