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Hyatt's (H) Q4 Earnings Surpass Estimates, Revenues Miss

Zacks Equity Research

Hyatt Hotels Corporation H reported mixed fourth-quarter 2018 results, wherein earnings surpassed the Zacks Consensus Estimate while revenues lagged the same. With this, the bottom line exceeded the consensus mark for 12 straight quarters, while the top line missed the same for the fourth consecutive quarter.

Adjusted earnings of 62 cents per share outpaced the Zacks Consensus Estimate of 22 cents. In the prior-year quarter, the company had reported earnings of 6 cents per share. Total revenues came in at $1,138 million, which inched up 1.9% from the prior-year quarter figure but missed the consensus estimate of $1,152 million.

Following the quarterly results, shares of Hyatt decreased 1.2% in after-hours trading. Also, the stock has lost 7.2% compared with the industry’s 23.4% decline in a year’s time.

RevPAR Details

In the reported quarter, comparable system-wide revenues per available room (RevPAR) increased 1.5%, taking into account a 3% increase of the same at comparable owned and leased hotels. Also, comparable U.S. hotel RevPAR rose 0.9%. While full-service hotel RevPAR was up 2.6%, that of select service hotel declined 3%.

Operating Highlights

Net income increased 79.2% to $44 million in the fourth quarter. Meanwhile, adjusted EBITDA rose 5% to $182 million (up 6.8% in constant currency). Adjusted EBITDA margin expanded 250 basis points (bps) to 28.7%.

Meanwhile, comparable owned and leased hotels operating margin expanded 240 basis points to 25.1%.

Hyatt Hotels Corporation Price, Consensus and EPS Surprise

Hyatt Hotels Corporation Price, Consensus and EPS Surprise | 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 $461 million, down 10.9% from the year-ago figure number. Comparable owned and leased hotels RevPAR increased 2.3%. ADR increased 1% and occupancy rose 100 bps from a year ago.

On the flip side, adjusted EBITDA decreased 2.2% to $104 million. At a constant currency, the same declined 1.2% due to transaction activities.

Revenues at Americas Management and Franchising summed $99 million, reflecting an 8.9% increase from the year-ago figure and a 9.5% rise at a constant currency.

RevPAR for comparable Americas full-service hotels increased 2.7%. While ADR climbed 2.1%, occupancy increased 40 bps from the year-ago quarter number.

Meanwhile, RevPAR for comparable Americas select-service hotels was down 3.8%. While occupancy decreased 230 bps, ADR declined 0.7% in the quarter under review.

Adjusted EBITDA increased 11.6% (up 12.3% in a constant currency) to $86 million.

Revenues at ASPAC Management and Franchising rose 10.6% year over year (up 13.4% in a constant currency) to $37 million.

RevPAR for comparable ASPAC full-service hotels declined 0.6%. Moreover, occupancy rose 120 bps but ADR fell 0.7% in the quarter.

Adjusted EBITDA increased 10.6% (up 13.4% at constant currency) to $37 million.

Revenues at EAME/SW Asia Management and Franchising increased 5.9% (10.3% in a constant currency) year over year to $22 million.

Comparable EAME/SW Asia full-service hotels’ RevPAR dropped 1.8%. ADR decreased 4.9% and occupancy rose 220 bps.

Adjusted EBITDA increased 5.9% (up 10.3% at a constant currency) to $22 million.

Balance Sheet

As of Dec 31, 2018, Hyatt reported cash and cash equivalents of $570 million. The total debt was $1.6 billion as of Dec 31, 2018.

In 2018, the company repurchased $966 million shares of its common stock. For the first quarter of 2019, Hyatt’s board of directors declared a cash dividend of 19 cents per share, up 26.7% from the prior-quarter dividend. The raised dividend is payable Mar 11, 2019, to Class A and Class B shareholders of record as of Feb 27, 2019.

2019 Guidance

For 2019, Hyatt expects net income of $109-$147 million. Capital expenditures are expected to be approximately $375 million. The company continues to expect adjusted EBITDA in the range of $780-$800 million. Comparable system-wide RevPAR is 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. It now expects to return roughly $300 million to its shareholders through a combination of cash dividends on its common stock and share repurchases.

Hyatt, which shares space with Extended Stay America, Inc. STAY, Marriott Vacations Worldwide Corporation VAC and Hilton Worldwide Holdings Inc. HLT, has a Zacks Rank #3 (Hold). 

Key Pick

A better-ranked stock in the same space is Belmond Ltd. BEL, which sports a Zacks Rank #1 (Strong Buy). The company delivered better-than-expected earnings in the trailing two quarters. You can see the complete list of today’s Zacks #1 Rank stocks here.

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