Hyatt Hotels (H) Down 57.2% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Hyatt Hotels (H). Shares have lost about 57.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Hyatt Hotels due for a breakout? 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 Q4 Earnings & Revenues Beat Estimates

Hyatt Hotels reported better-than-expected fourth-quarter 2019 results. Notably, the company’s bottom line has surpassed the Zacks Consensus Estimate for the 16th straight quarter, while the top line has outpaced the same for the fourth consecutive quarter.

Adjusted earnings came in at 47 cents per share, which outpaced the Zacks Consensus Estimate of 20 cents. In the prior-year quarter, the company reported earnings of 62 cents per share.

Total revenues were $1,275 million, beat the Zacks Consensus Estimate of $1,182 million and improved 12% from the prior-year quarter.

Despite reporting better-than-expected earnings, the company’s shares declined 3.1% in after-hour trading session on Feb 19 due to cautious 2020 outlook.

RevPAR Details

In the reported quarter, comparable system-wide revenues per available room (RevPAR) were down 0.5%. RevPAR in the quarter under review was impacted by political turbulence in Hong Kong and the timing of Jewish holiday. Comparable owned and leased hotels RevPAR improved 1.4%. However, comparable U.S. hotel RevPAR fell 1.3%. While full-service hotel RevPAR was down 1.1%, that of select service hotel declined 1.8%.

Operating Highlights

Net income increased 621.5% to $321 million in the fourth quarter. However, adjusted EBITDA increased 5.3% to $191 million (up 5.7% at constant currency). Moreover, adjusted EBITDA margin expanded 100 bps to 29.7%. Meanwhile, comparable owned and leased hotels’ operating came in at 24.6%, flat 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 $444 million, down 3.7% from the year-ago quarter number. Comparable owned and leased hotels RevPAR were up 1.4%. While ADR was up 1.4%, occupancy increased by 10 basis points. Meanwhile, adjusted EBITDA decreased 8.6% to $96 million. At constant currency, the same declined 8.3%.

Revenues at Americas Management and Franchising amounted to $125 million, reflecting an increase of 25.5% and 25.9% from the year-ago figure and constant currency, respectively. RevPAR for comparable Americas full-service hotels decreased 0.6%. ADR advanced 0.3%, occupancy decreased 60 bps from the year-ago quarter number. Meanwhile, RevPAR for comparable Americas select-service hotels was down 1.8%. Occupancy increased 10 bps but ADR declined 2% in the quarter under review. Adjusted EBITDA increased 6% (up 6.3% at constant currency) to $91 million.

Revenues at ASPAC Management and Franchising rose 8.2% year over year (up 8.3% at constant currency) to $40 million. RevPAR for comparable ASPAC full-service hotels declined 3.5% on account of political unrest in Hong Kong, which offset growth in Japan and South Korea. While occupancy was down 70 bps, ADR declined 2.7% in the quarter. Adjusted EBITDA jumped 20.2% (up 20.2% at constant currency) to $28 million.

Revenues at EAME/SW Asia Management and Franchising improved 17.5% to $25 million. Comparable EAME/SW Asia full-service hotels’ RevPAR increased 7.2% due to robust demand in most of the European markets. While ADR decreased 1.9%, occupancy rose 500 bps. Adjusted EBITDA rose 25.9% (were up 27.6% at constant currency) to $16 million.

Balance Sheet

As of Dec 31, 2019, Hyatt reported cash and cash equivalents of $893 million. The total debt was $1.623 billion as of Dec 31, 2019. During fourth-quarter 2019, Hyatt repurchased 1,791,854 Class A shares for nearly $141 million. The company ended the fourth quarter with 36,109,179 Class A and 65,463,274 Class B shares issued and outstanding.

2020 Guidance

Hyatt guidance does not include any impact of the coronavirus outbreak. The company stated that the impact of coronavirus on its business cannot be determined at this time. The company expects net income of roughly $113-$144 million. Adjusted EBITDA is anticipated in the $760-$780 million band. Comparable system-wide RevPAR is expected to be in the range of down 0.5% to up 1.5% year over year. On a net-rooms basis, Hyatt continues to expect unit growth of roughly 6.5-7%, reflecting 80 new hotel openings.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -51.44% due to these changes.

VGM Scores

At this time, Hyatt Hotels has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Hyatt Hotels has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.