Wednesday's IBD 50 Stocks To Watch pick, travel leader Hyatt Hotels, is in buy range past its latest buy point following this week's breakout move. Hyatt stock rose modestly midday Wednesday, set to extend a win streak to five sessions ahead of Thursday's earnings report.
The Chicago-based hotel chain has over 1,200 properties and all-inclusive resorts scattered across 72 countries. In the fourth quarter of 2022, Hyatt opened 57 hotels, ranging from Germany to Mexico.
It's highly popular with business travelers, offering an array of loyalty rewards for its program members. Benefits include free nights, discounted member rates, room upgrades and complimentary amenities.
On Feb. 16, Hyatt reported better-than-expected Q4 earnings and sales. Hyatt earnings swung to a $2.55 per-share profit vs. the year-ago period's loss of $2.78 a share. Revenue rose 48% to $1.59 billion.
"In summary, as we assess overall business trends, we maintain our optimistic outlook," said CEO Mark Hoplamazian on the Q4 earnings call.
"Future bookings remain strong and performance continues to exceed expectations," Hoplamazian continued. "Conversations with corporate customers continue to suggest further recovery is ahead for group and business transient travel, and leisure transient shows no signs of slowing as evidenced by the strong bookings at our resorts."
First-quarter results are due out Thursday before the stock market opens. Wall Street expects Hyatt earnings to measure 51 cents per share on sales of $1.58 billion, according to FactSet.
Hyatt Revenue Growth Strong But Slowing
Since the hotel leader was unprofitable in recent years due to the Covid-19 pandemic, Hyatt stock has a weak 43 out of 99 Earnings Per Share Rating, according to IBD Stock Checkup. This metric takes into account growth and stability of earnings over the past three years, with the two most recent quarters weighed more heavily.
Despite a spotty long-term earnings track record, Hyatt does boast strong revenue growth over the last seven quarters. During the height of the pandemic, the company posted sales of $2.07 billion in 2020, while 2022 revenue hit $5.89 billion, which exceeded pre-pandemic revenue levels. Revenues are expected to rise 11% in 2023 to $6.57 billion, per FactSet estimates.
But that once-stellar revenue growth is slowing. Over the last three quarters, sales growth declined from 124% to 81% to 48%. And revenue growth is seen slowing further, down to a 24% rate in Thursday's report.
Finally, Hyatt stock shows a solid and improving 90 out of 99 IBD Composite Rating.
Hyatt Stock In Buy Range
Hyatt shares pared gains to 0.8% midday Wednesday, and remain in buy range above a cup-with-handle's 118.02 buy point after Tuesday's breakout, according to IBD MarketSmith. The 5% buy zone goes up to 123.92. Keep in mind the imminent earnings report does increase this breakout's risk of failure. And the stock market is relatively weak.
A potential flaw is the stock's lagging relative strength line. Ideally, the RS line should hit a new high on the breakout day to confirm the breakout's strength, but Hyatt's RS line is still decently off its old highs. The RS line measures a stock's price performance vs. the S&P 500.
Best Stocks To Buy And Watch
These are three recent IBD 50 Stocks To Watch picks.
| Company | Symbol | Buy point | Type of base |
|---|---|---|---|
| Royal Caribbean | 76.40 | Cup base | |
| Hubbell | 257.61 | Flat base | |
| Vertex Pharmaceuticals | 325.29 | Cup base |
Source: IBD Data As Of May 3, 2023
Follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more on the best stocks to buy and watch and the stock market.
