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Baird has made an adjustment to the price target of Hyatt Hotels Corporation (NYSE: NYSE:H), bringing it down to $157 from the previous $158, while maintaining a Neutral rating on the stock.
The adjustment follows a reassessment of the company's revenue and profit forecasts, particularly in its Distribution segment, due to recent natural disasters and market trends.
The firm revised its model for Hyatt in mid-August after the sale of the Hyatt Regency Orlando. However, it noted that many other analysts have not updated their models since then. The impact of several hurricanes in Mexico and the Caribbean during the third quarter of 2024, extending into the fourth quarter, is expected to negatively affect the performance of Apple (NASDAQ:AAPL) Leisure Group (ALG), a part of Hyatt's Distribution segment. Consequently, the updated Baird model reflects reduced revenues and profit for this part of Hyatt's business.
Domestic leisure trends in the United States showed sluggishness in the third quarter of 2024. In China, the performance was roughly in line with Baird's expectations, with a mid-single-digit percentage decline during August and September. Europe's performance was as expected or slightly below, but Hyatt's portfolio, which includes one owned hotel, likely saw an outsized benefit from the Paris Olympics.
Strategically, Hyatt has completed its transition to an asset-light model, meaning future asset sales will be more opportunistic. The potential sale or redevelopment of the Andaz London Liverpool Street is anticipated to occur in 2025.
In other recent news, Hyatt Hotels Corporation has made significant strides in its financial and strategic landscape. The company announced a substantial share repurchase of $250 million worth of Class B shares from the Margo and Tom Pritzker Foundation, a move that is part of its ongoing capital management strategy. The repurchase, which is set to close soon, will leave around $982 million under Hyatt's current repurchase authorization.
In terms of analyst coverage, Goldman Sachs initiated a Neutral rating on Hyatt with a price target of $151, while Jefferies, Stifel, and JPMorgan raised their price targets to $152, $151, and $164, respectively. Citi, reaffirming its Neutral stance, maintained its price target at $165.
Citi's third-quarter 2024 earnings per share (EPS) estimate for Hyatt has been set at $0.95, and the full-year 2024 EPS estimate has been raised to $4.37. However, the fiscal year 2025 EPS estimate has been adjusted downwards to $4.04.
In other company news, Hyatt decided to implement the Oracle (NYSE:ORCL) OPERA Cloud platform across its global hotel portfolio, a move aimed at standardizing operations and enhancing data management. Furthermore, Hyatt has been making strategic changes, including the sale of the Orlando Hyatt Regency and the acquisition of Standard International, aligning with its transition towards an asset-light business model.
InvestingPro Insights
To complement Baird's analysis of Hyatt Hotels Corporation (NYSE:H), recent data from InvestingPro provides additional context. Despite the lowered price target, Hyatt's financials show some positive indicators. The company boasts impressive gross profit margins, with InvestingPro data revealing a gross profit margin of 68.06% for the last twelve months as of Q2 2024. This robust margin suggests Hyatt maintains strong pricing power and cost management in its core operations, even amid challenges in certain segments.
InvestingPro Tips highlight that management has been aggressively buying back shares, aligning with the article's mention of Hyatt reaching its full-year target for shareholder capital returns. This strategy often signals management's confidence in the company's value and future prospects.
Additionally, Hyatt is trading at a low P/E ratio relative to near-term earnings growth, with a PEG ratio of 0.13 for the last twelve months as of Q2 2024. This metric could indicate that the stock is potentially undervalued considering its growth prospects, despite the recent price target adjustment.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for Hyatt Hotels Corporation, providing a deeper understanding of the company's financial health and market position.
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