NEW YORK, NY – MAY 21: One of the entrance of the International Hotel Grand Hyatt is seen shuttered … [+] during the outbreak of the COVID-19 pandemic on May 21, 2020 in New York City. (Photo by Eduardo MunozAlvarez/VIEWpress via Getty Images) Hyatt HotelsH is seeing a strong recovery in its business, as leisure travel picks up with a vengeance following close to two years of Covid-19 pandemic restrictions. The hotel chain posted a stronger than expected set of Q2 earnings in early August, with the stock returning almost 14% over the past month, outperforming the broader S&P 500 which has gained just about 4% over the same period. Over the quarter, Hyatt’s revenue rose by about 123% year-over-year to $1.48 billion, while adjusted earnings stood at about $0.46 per share, compared to a loss in the year-ago quarter, as operating metrics rose across the board. Occupancy rates for managed and franchised hotels rose 18% to almost 66%, while average daily rates surged 32.4% to about $199. The company’s recent acquisition of Apple Leisure Group late last year was also very well timed, as it helped raise capacity and service surging demand. For perspective, Hyatt’s total managed and franchised rooms stood at 290,987, up almost 19% versus last year. Now notably, Hyatt’s strong results have come despite a weak U.S. economy with GDP contracting over the last two quarters straight. This is likely due to the fact that consumers have scaled back on spending on products amid surging inflation, although they appear to be shifting this more toward experiences such as travel and dining. So, is Hyatt stock a buy, given the strong recent momentum? While Hyatt’s recovery has been strong, the stock trades at a relatively high 48x consensus 2023 earnings. Moreover, the company holds a considerable amount of debt, with net debt standing at $2.4 billion in Q2 2022, partly due to the acquisition of Apple Leisure Group. Net debt is about 9x the company’s pre-pandemic (2019) adjusted EBITDA, which is somewhat high. Although the company is looking to divest its lower-performing properties to pay down debt, it remains to be seen how well this will progress, if the economy continues to remain weak. Overall we remain neutral on Hyatt stock, with a $95 price estimate, which is roughly in line with the current market price. See our analysis on Hyatt Valuation: Is H Stock Expensive Or Cheap? for more details on Hyatt’s valuation and how it compares with peers. For more information on Hyatt’s business model and revenue trends, check out our dashboard on Hyatt Revenue: How H Makes Money. What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016. Invest with Trefis Market Beating Portfolios See all Trefis Price Estimates
