Why Is Hyatt Hotels (H) Up 21.5% Since Last Earnings Report?

A month has gone by since the last earnings report for Hyatt Hotels (H). Shares have added about 21.5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Hyatt Hotels 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 Meet Estimates, Revenues Miss Mark

Hyatt Hotels reported first-quarter 2020 results, wherein the bottom line matched the Zacks Consensus Estimate but the top line missed the same. Both the metrics also declined sharply year over year owing to the coronavirus pandemic.

The company reported adjusted loss per share of 35 cents, in line with the Zacks Consensus Estimate. In the prior-year quarter, the company had reported adjusted earnings per share of 45 cents. Total revenues were $993 million, which lagged the Zacks Consensus Estimate of $1,025 million and declined19.9% from the year-ago quarter.

Coronavirus Update

While Hyatt has been witnessing signs of improving demand in Greater China, negative trends in the rest of the world are yet to stabilize. At the end of April, the company announced occupancy in Greater China was approaching 25%. As of Apr 30, 2020, system-wide occupancy rates are averaging nearly 15% for hotels that remain operational.

Moreover, the company announced that as of Apr 30, 2020, nearly 35% of its system-wide hotels remain suspended. The company has suspended operations in 62% full service hotels and 19% select service hotels in the Americas. It has suspended operations in 17% and 58% select service hotels in the ASPAC region and EAME/SW Asia region, respectively.

RevPAR Details

In the reported quarter, comparable system-wide revenues per available room (RevPAR) were down 28.1%. RevPAR in the quarter under review was impacted by the coronavirus-induced shutdowns and travel restrictions. Comparable owned and leased hotels RevPAR declined 25.8%. Moreover, comparable U.S. hotel RevPAR fell 24.5%. While full-service hotel RevPAR was down 25.2%, that of select service hotel declined 23%.

Operating Highlights

Adjusted EBITDA slumped 54.3% to $86 million (down 53.9% at constant currency). Moreover, adjusted EBITDA margin contracted 1,010 bps to 18.3%. Meanwhile, comparable owned and leased hotels’ operating came in at 14.5%, down 1,060 bps year over year.

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 $330 million, down 30.7% from the year-ago quarter number. The sharp decline can primarily be attributed to the impact of the coronavirus pandemic on comparable owned and leased hotels and dispositions. Comparable owned and leased hotels RevPAR were down 25.8%. While ADR was down 0.5%, occupancy increased by 1,880 basis points to 55.3%. Meanwhile, adjusted EBITDA decreased 66.9% to $34 million. At constant currency, the same declined 66.8%.

Revenues at Americas Management and Franchising amounted to $111 million, reflecting a decline of 21.3% and 21% from the year-ago figure and constant currency, respectively. RevPAR for comparable Americas full-service hotels decreased 24.2%. While ADR declined 1.2%, occupancy decreased 1,650 bps to 54.3% from the year-ago quarter number. Meanwhile, RevPAR for comparable Americas select-service hotels was down 22.9%. Occupancy increased 1,380 bps to 56.7% and ADR declined 4% in the quarter under review. Adjusted EBITDA increased 26.6% (down26.6% at constant currency) to $68 million.

Revenues at ASPAC Management and Franchising decreased 40.6% year over year (down 39.6% at constant currency) to $19 million. RevPAR for comparable ASPAC full-service hotels declined 48% on account of increase in coronavirus cases beginning in late January 2020, mostly in Greater China, and spreading to other countries in the region throughout February 2020. While occupancy was down 3,150 bps to 36.3%, ADR declined 3.1%in the quarter. Adjusted EBITDA were down 58.5% (up 57.6% at constant currency) to $8 million.

Revenues at EAME/SW Asia Management and Franchising were down 43% to $10 million. Comparable EAME/SW Asia full-service hotels’ RevPAR decreased 22.5% on account of suspension of hotel operation owing to the ongoing crisis. While ADR decreased 0.7%, occupancy fell 800 bps to 58.2%. Adjusted EBITDA rose 91.2% (were up 90.8% at constant currency) to $1 million.

Balance Sheet

As of Mar 31, 2020, Hyatt reported cash and cash equivalents (including investments in highly-rated money market funds and similar investments) of $1,194 million. The total debt was $1.962 billion as of Mar 31, 2020.

Hyatt repurchased $69 million shares of its Class A common stock year to date through Mar 2, 2020. The company ended the first quarter with 35,570,053 Class A and 65,463,274 Class B shares issued as well as outstanding.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -80.8% due to these changes.

VGM Scores

At this time, Hyatt Hotels has a poor Growth Score of F, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was 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 F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Hyatt Hotels has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

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