It has been about a month since the last earnings report for Hyatt Hotels CorporationH . Shares have added about 8.5% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is H due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Hyatt Q1 Earnings Beat, Revenues Miss, Margins Fall
Hyatt Hotels posted mixed results in the first quarter of 2018, wherein earnings surpassed the Zacks Consensus Estimate while revenues lagged the same.
Adjusted earnings of 33 cents per share beat the consensus estimate of 29 cents by 13.8%. Earnings, however, fell 51.5% year over year, reflecting pressure on the quarter's EBITDA margin.
Total revenues of $1.11 billion declined 1.5% from the prior-year quarter due to lower contribution from owned and leased hotels. Revenues also missed the consensus estimate of $1.14 billion by 2.6%
In the quarter, comparable system-wide revenues per available room(RevPAR) increased 4.3%, taking into account an increase of 1.6% at comparable owned and leased hotels. Excluding the effect of Easter holiday timings,comparable system-wide RevPAR increased 4.6%, and comparable owned and leased RevPAR inched up 2%.
Comparable U.S. hotel RevPAR increased 2.7%. Full-service hotel RevPAR rose 2.7% and that of select service hotel grew 2.8%. Excluding the impact of Easter holiday timing, comparable U.S. hotel RevPAR increased 3.1%, with full and select service hotel RevPAR increasing 3.3% and 2.8%, respectively.
In the first quarter, net income increased a whopping 643.6% to $411 million. Adjusted EBITDA declined 7.3% to $202 million (down 8.4% in constant currency). Adjusted EBITDA margin decreased 30 basis points (bps) to 30.7%.
Comparable owned and leased hotels operating margin increased 80 basis points to 24.3%.
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.
Owned and Leased Hotels revenues were $515 million, down 11.9% (13.3% in constant currency) from the year-ago figure.
In constant currency, comparable owned and leased hotels RevPAR increased 1.6%. ADR increased 0.9% and occupancy rose 50 bps from a year ago.
Adjusted EBITDA decreased 20.7% to $113 million. At constant currency, the same declined 21.3% due to transaction activities.
Revenues at Americas Management and Franchising were $98 million, reflecting an increase of 9.5% from the year-ago figure and a 9.2% rise at constant currency.
RevPARfor comparable Americas fullservice hotels increased 3.1%. ADR climbed 0.8% at constant currency and occupancy increased 170 bps from the year-ago quarter.
Meanwhile, RevPAR for comparable Americas select-service hotels rose 3.6%. Occupancy increased 150bps and ADR improved 1.5%.
Adjusted EBITDA increased 14.6% (up 14.3% in constant currency) to $87 million.
Revenues at ASPAC Management and Franchising rose 20.1% year over year (up 14.6% in constant currency) to $30 million.
RevPAR for comparable ASPAC full-service hotels increased 6.7%, driven by strong RevPAR growth in Greater China. Notably, occupancy rose 350 bps and ADR climbed 1.5% in the quarter under review.
Adjusted EBITDA increased 23.4% (up 16.1% at constant currency) to $18 million.
Revenues at EAME/SW Asia Management and Franchising increased 18.3% (12.8% in constant currency) year over year to $18 million.
Comparable EAME/SW Asiafull-service hotels' RevPAR inched up 7%, driven by growth in Turkey, France and India. ADR increased 1% and occupancy rose 380 bps.
RevPAR for comparable EAME/SW Asia select-service hotels rose 6.1%. Occupancy increased 440 bps while ADR declined 0.7%.
Adjusted EBITDA increased 25.9% (up 19.8% at constant currency) to $10 million.
As of Mar 31, 2018, Hyatt reported cash and cash equivalents, including investments in highly-rated money market funds and similar investments, of $1,160 million, up from $503 million at the end of 2017.
Total debt was $1.5 billion as of Mar 31, 2018, nearly unchanged from that of 2017 end.
During the first quarter of 2018, the company repurchased $95 million shares of its common stock. As of Apr 27, Hyatt had approximately $706 million remaining under its share repurchase authorization.
The company expects net income in the range of $495-553 million, up from the previously guided range of $176-$215 million. Capital expenditures are expected to be approximately $375 million for 2018 (previous guidance was $350 million). Adjusted EBITDA is expected to be within the $765-$785 million range, lower than the previous guidance of $805-$825 million.
Comparable systemwide RevPAR is anticipated to increase 2-3.5% year over year. The company expected growth of the same in the range of 1-3% earlier.
The company expects to grow units, on a net rooms basis, by roughly 6.5-7% (prior guidance was 6-6.5%), reflecting 60 new hotel openings. It also expects to return at least $700 million to its shareholders through a combination of cash dividends on its common stock and share repurchases.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There have been two revisions higher for the current quarter compared to seven lower.
Hyatt Hotels Corporation Price and Consensus
At this time, H has a subpar Growth Score of D and a grade with the same score on the momentum front. The stock was also allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate investors will probably be better served looking elsewhere.
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Notably, H has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.