Here's Why You Should Retain Hyatt (H) Stock in Your Portfolio
Hyatt Hotels Corporation H will likely benefit from solid leisure-transient demand and strategic acquisitions. Also, focus on Apple Leisure Group integration bodes well. However, a volatile macroeconomic environment is a concern.
Let’s delve deeper.
Growth Catalysts
Shares of Hyatt have gained 26.1% in the past three months compared with the industry’s 13.9% growth. The company has benefited from a rise in leisure-transient demand, easing travel restrictions and ramped-up airline capacity. During the third quarter of 2023, leisure-transient revenues grew 4% year over year and 22% compared with 2019 levels on a comparable system-wide basis. During the quarter, H recorded an increase of 10% year over year in system-wide group bookings.
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Hyatt continues to witness an outstanding quarter in group production for America's full-service managed properties, securing bookings of around $450 million, up 17% year over year. Given continued strength of leisure-travel demand, favorable pricing environment and airlift activities, management is optimistic about continued growth in demand in 2024.
Increased focus on the integration of Apple Leisure Group bodes well. In third-quarter 2023, H reported solid segmental performance owing to strength in net package RevPAR, increased membership contracts for ALG’s Unlimited Vacation Club and favorable pricing. During the quarter, total net package revenues were up 1% year over year. Apple Leisure Group Vacations business improved profitability and margins through strong business and technology optimization.
Given the emphasis on distribution capabilities with an end-to-end booking process and strong operational execution, an integrated experience (with AMR and UVC program) and destination management services, management is optimistic about ALG’s performance in 2024.
Focus on acquisitions augurs well for Hyatt. The acquisition of Dream Hotel Group, renowned for its dynamic portfolio of lifestyle hotel brands such as Dream Hotels, The Chatwal, The Time New York and Unscripted Hotels, positions Hyatt to expand its brand presence in popular destinations like Nashville, Hollywood, South Beach and New York City. The addition of Dream Valle de Guadalupe in Mexico is poised to facilitate Hyatt's entry into the emerging leisure market in the region. From the acquisition date until Sep 30, 2023, Dream Hotel Group contributed $5 million in total revenues and generated a net income of $3 million.
Concerns
The company’s operations are pursuant to financial market uncertainties due to liquidity constraints. Financing conditions in certain regions have been challenging due to rising interest rates. Hyatt is cautious as further challenges pave the path for inability to access cash and threat of new financing arrangements. Also, a rise in labor costs is a headwind.
Zacks Rank
Hyatt currently carries a Zacks Rank #3 (Hold).
Key Picks
Some better-ranked stocks in the Zacks Consumer Discretionary sector include:
Royal Caribbean Cruises Ltd. RCL sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
RCL has a trailing four-quarter earnings surprise of 28.3%, on average. Shares of RCL have surged 162.2% in the past year.
The Zacks Consensus Estimate for RCL’s 2024 sales and EPS indicates a rise of 13.7% and 38.1%, respectively, from the year-ago levels.
Live Nation Entertainment, Inc. LYV flaunts a Zacks Rank #1. It has a trailing four-quarter earnings surprise of 37.5%, on average. Shares of LYV have increased 31.4% in the past year.
The Zacks Consensus Estimate for LYV’s 2024 sales and EPS suggests an improvement of 8.2% and 61.1%, respectively, from the prior-year levels.
JAKKS Pacific, Inc. JAKK sports a Zacks Rank #1. It has a trailing four-quarter earnings surprise of 61.8%, on average. Shares of JAKK have jumped 105.1% in the past year.
The Zacks Consensus Estimate for JAKK’s 2024 sales implies 3.6% growth from the year-earlier levels.
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Hyatt Hotels Corporation (H) : Free Stock Analysis Report
Royal Caribbean Cruises Ltd. (RCL) : Free Stock Analysis Report
JAKKS Pacific, Inc. (JAKK) : Free Stock Analysis Report
Live Nation Entertainment, Inc. (LYV) : Free Stock Analysis Report
