Please ensure Javascript is enabled for purposes of website accessibility

Hyatt Hotels Corporation Earnings: Spiking Profits and a Rising Outlook

By Demitri Kalogeropoulos - Aug 3, 2017 at 2:32PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The hotel operator raised its sales and earnings targets for the year.

At its last quarterly check in, Hyatt Hotels (H 7.16%) announced surprisingly strong sales growth but left its full-year outlook unchanged. This week, the hotel chain again beat expectations. This time, though, management lifted its 2017 operating targets in response to the gains.

More on that rising forecast in a moment. First, here's how the latest headline numbers compare to the prior year period:

Metric

Q2 2017

Q2 2016

Year-Over-Year Change

Revenue

$1.20 billion

$1.17 billion

3%

Net Income

$87 million

$67 million

30%

EPS

$0.68

$0.49

39%

Data source: Hyatt's financial filings.

What happened this quarter?

Hyatt's growth pace declined slightly, but the company's 3% expansion was still above management's full-year forecast. Profits shot higher thanks to rising management and franchise fees in addition to gains from property sales.

A couple at a hotel check-in desk.

Image source: Getty Images.

Key highlights of the quarter include:

  • Revenue per average room night (RevPAR) rose 2.9% despite the negative impact of a timing shift that pushed the Easter holiday into the previous quarter. Over the first half of the year, RevPAR is up 4%, compared to 2.5% for the full 2016 fiscal year.
  • Adjusted earnings ticked up by less than 1% to $229 million as net income soared higher by 30%.
  • Management and franchise fees jumped 12% to $130 million.
  • Hyatt increased its hotel base by 22 locations or 10%, and its inventory of rooms by 7%, or 3,366.
  • The company sold two large properties, the 815-room Regency Grand Cypress and the 393-room Regency Louisville, as part of its asset recycling program. It raised $267 million in the transactions.

What management had to say

Management said the hotel sales are helping improve Hyatt's finances even as earnings expand. "We have made good progress toward our goal of being a net seller of assets in 2017 while sustaining solid earnings growth and returning meaningful capital to our shareholders," said CEO Mark Hoplamazian in a press release.

Executives explained that the latest operating metrics demonstrated improving sales and profit trends. "Our second-quarter results reflect the strength of the Hyatt brands, demonstrating continued, upward momentum in our business," Hoplamazian said. Management highlighted the company's quickly rising hotel and room base as well. "We continue to expand at a rapid pace, with hotel rooms up 7% versus prior year and a pipeline of signed deals representing 37% of our current rooms inventory."

Looking forward

The property deals keep Hyatt on pace to add roughly 60 hotels to its portfolio this year. Its longer-term plans include contracts on 300 hotel launches, including several in entirely new markets.

Meanwhile, the company now sees sales and profits rising at a faster pace than executives had targeted at the start of the fiscal year 2017. RevPAR growth will be between 1% and 3%, compared to the prior forecast of between 0% and 2%. The new range opens up the possibility of accelerated full-year growth compared to 2016's 2.5% uptick.

The updated target for adjusted earnings ranges from $795 million to $815 million, compared to the $769 million to $804 million outlook executives had previously issued. At the midpoint of guidance, that implies an almost 3% improvement over last year's result. Thus, both its top and bottom line figures describe steady growth for a slight improvement over the flat outlook that Hyatt had held as recently as early May.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Hyatt Hotels Corporation Stock Quote
Hyatt Hotels Corporation
H
$76.31 (7.16%) $5.10

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
336%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.