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Hyatt (H) Beats on Q2 Earnings & Revenues, Revises 2019 View

Zacks Equity Research

Hyatt Hotels Corporation H reported better-than-expected second-quarter 2019 results. With this, the company’s bottom line surpassed the Zacks Consensus Estimate for 14 straight quarters, while the top line outpaced the same for the second consecutive quarter.

Adjusted earnings came in at 76 cents per share, which outpaced the Zacks Consensus Estimate of 42 cents. In the prior-year quarter, the company reported earnings of 72 cents per share.

Total revenues were $1,289 million, which increased 13.8% from the prior-year quarter figure and also beat the consensus estimate of $1,227 million.

RevPAR Details

In the reported quarter, comparable system-wide revenues per available room (RevPAR) increased 1.3%, taking into account a 2.3% 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 0.7%, that of select service hotel declined 2.3%.

Operating Highlights

Net income increased 10.6% to $86 million in the second quarter. However,, adjusted EBITDA decreased 2.1% to $213 million (down 1% at constant currency). Also, adjusted EBITDA margin contracted 260 basis points (bps) to 31.6%.

Meanwhile, comparable owned and leased hotels’ operating margin expanded 10 basis points to 26.4%.

Hyatt Hotels Corporation Price, Consensus and EPS Surprise

Hyatt Hotels Corporation Price, Consensus and EPS Surprise

Hyatt Hotels Corporation price-consensus-eps-surprise-chart | Hyatt Hotels Corporation Quote

Segmental Details

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 $481 million, up 0.4% from the year-ago quarter number. Comparable owned and leased hotels RevPAR increased 2.3%. While ADR increased 1.2%, occupancy declined 80 bps from a year ago.

On the flip side, adjusted EBITDA decreased 4.4%. At constant currency, the same declined 3.8% due to transaction activities.

Revenues at Americas Management and Franchising summed $136 million, reflecting a 26% increase from the year-ago figure and a 26.3% rise at constant currency.

RevPAR for comparable Americas full-service hotels increased 2.5%. While ADR climbed 1.5%, occupancy decreased 80 bps from the year-ago quarter number.

Meanwhile, RevPAR for comparable Americas select-service hotels was down 2.4%. Occupancy decreased 80 bps, whereas ADR declined 1.4% in the quarter under review.

Adjusted EBITDA increased 5.4% (up 5.7% at constant currency) to $101 million.

Revenues at ASPAC Management and Franchising rose 8.9% year over year (up 13.1% at constant currency) to $32 million.

RevPAR for comparable ASPAC full-service hotels increased 1.2%. Moreover, occupancy rose 110 bps but ADR was down 0.4% in the quarter.

Adjusted EBITDA increased 17.5% (up 23.9% at constant currency) to $20 million.

Revenues at EAME/SW Asia Management and Franchising remained flat at $19 million.

Comparable EAME/SW Asia full-service hotels’ RevPAR increased 3.7% due to robust demand in Western Europe and Southwest Asia. ADR decreased 1% but occupancy rose 310 bps.

Adjusted EBITDA decreased 5.8% (down 1.3% at constant currency) to $11 million.

Balance Sheet

As of Jun 30, 2019, Hyatt reported cash and cash equivalents of $515 million. The total debt was $1.7 billion as of Jun 30, 2019.

During the second quarter of 2019, Hyatt repurchased 599,678 Class A shares for $45 million. The company ended second-quarter 2019 with 37,867,014 Class A and 67,115,828 Class B shares issued and outstanding.

2019 Guidance

Hyatt revised its 2019 guidance. The company now expects net income of roughly $231-$275 million, up from the prior estimate of $144-183 million. Adjusted EBITDA is anticipated in the $755-$775 million band compared with $780-$800 million projected earlier. Comparable system-wide RevPAR is expected to increase 1-2% year over year compared with 1-3% anticipated previously.

On a net-rooms basis, Hyatt expects unit growth of roughly 7.25-7.75%, reflecting 80 new hotel openings. Earlier, the company had projected unit growth of roughly 7.0-7.5%.

Zacks Rank & Key Picks

Hyatt has a Zacks Rank #3 (Hold). Better-ranked stocks worth considering in the same space include Wyndham Destinations, Inc. WYND, Wyndham Hotels & Resorts, Inc. WH and Huazhu Group Limited HTHT, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Wyndham Destinations reported earnings beat in each of the trailing four quarters, the average being 6.5%.

Wyndham Hotels & Resorts and Huazhu Group have an impressive long-term earnings growth rate of 11.5% and 12.7%, respectively.

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