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Why Huazhu Group Stock Jumped Today

By Jeremy Bowman – Updated Apr 13, 2019 at 7:02AM

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Shares of the Chinese hotelier surged after a strong earnings report.

What happened

Shares of Huazhu Group (HTHT -3.26%) were moving higher today after the Chinese hotel operator turned in a strong fourth-quarter earnings report, beating estimates on the top and bottom lines. As a result, the stock was up 7.7% as of 12:12 p.m. EDT, after gaining as much as 16.1% earlier in the trading session.

So what

Huazhu said revenue increased 20.6% in the quarter to $390.3 million, beating estimates of $378.4 million; the company added 214 new hotels, to grow its hotel network by 13% year over year to 4,230. Revenue per available room (RevPAR), a key industry metric, rose 10%, as the average daily rate increased 9%.

A receptionist greets a man at a Chinese hotel

Image source: Getty Images.

Gross margin surged from 27.1% to 35.3%, due to the increase in RevPAR, as the percentage of franchised hotels increased. Selling and marketing, and general and administrative expenses, also came down as a percentage of revenue; this drove operating income up 156% to $58.1 million.

Adjusted earnings per share rose from $0.10 a year ago to $0.17, topping expectations for $0.13.

CEO Jenny Zhang called the results "strong" and touted the company's future growth opportunities:

At the end of 2018, our hotel pipeline was at a record high of 1,105 hotels, or 26% of hotels in operation. Therefore, we expect our hotel network expansion to further accelerate in 2019. Our hotel network expansion will be primarily driven by midscale hotel openings.

Check out the latest earnings call transcript for Huazhu Group.

Now what

Huazhu's guidance called for more solid growth this year as it forecast an increase in revenue of 15% to 17%, ahead of the analyst consensus. Considering the slowdown in the Chinese economy, Huazhu's growth looks especially impressive, and its strong pipeline should continue to deliver results for investors.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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