On Wednesday, CFRA maintained its Hold rating on InterContinental Hotels Group (IHG:LN) (NYSE: IHG) while reducing the stock's price target from GBP88.00 to GBP83.00. The adjustment reflects a valuation based on an enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) multiple of 16.7 times, which is beneath the company's five-year average forward EV/EBITDA of 17.6 times.
The firm also revised its earnings per share (EPS) estimates for the hotel group, lowering the 2024 EPS forecast to $4.22 from $4.31, which converts to GBP3.31 using the current exchange rate. However, the 2025 EPS projection was increased to $4.76 (GBP3.75) from the previous $4.58 estimate.
InterContinental Hotels reported a first-quarter revenue increase of 17.4% year-over-year to $2,164 million, which was $10 million higher than the consensus. Adjusted EBITDA for the quarter grew by 21.2% year-over-year to $1,086 million, achieving a margin of 50.2%, and aligning with the consensus figures.
The company experienced a 2.6% year-over-year rise in comparable revenue per available room (RevPAR), with an increase in the average daily rate by 2.3% and occupancy rates growing by 0.2%. When analyzed regionally, the Americas saw a slight decline in comparable RevPAR by 0.3%, while Europe, Middle East, Africa, and Asia (EMEAA) and Greater China regions enjoyed increases of 8.95% and 2.5%, respectively.
The analysis highlighted that InterContinental Hotels demonstrated stable to positive comparable revenue growth across various travel segments, with leisure travel revenue rising by 7%, group travel by 5%, and business travel remaining steady.
Despite acknowledging the positive aspects, such as the company's net unit growth, evidenced by the NOVUM agreement in April, and plans to enhance the IHG rewards program, CFRA prefers to maintain a cautious stance. The firm's decision to remain on the sidelines is influenced by headwinds in the U.S. market and the current stock valuation.
InvestingPro Insights
InterContinental Hotels Group (IHG) has shown resilience and growth in its recent financial performance. According to real-time data from InvestingPro, IHG boasts a market capitalization of $16.06 billion and a healthy P/E ratio of 22.35, which adjusts to a slightly more attractive 21.46 when considering the last twelve months as of Q4 2023. This valuation is particularly noteworthy given that IHG is trading at a low P/E ratio relative to near-term earnings growth, as highlighted in one of the InvestingPro Tips.
Moreover, the company's revenue growth of 21.83% over the last twelve months and a solid gross profit margin of 52.01% reflect its operational efficiency and ability to generate profit from its revenues. This operational strength is further supported by a robust operating income margin of 27.47%.
Investors looking for stability may find comfort in IHG's low price volatility, as mentioned in another InvestingPro Tip. For those considering a deeper dive into IHG's financial health, there are additional InvestingPro Tips available, offering insights such as the company's moderate level of debt and analysts' predictions of profitability this year. To access these insights and more, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
With the stock experiencing a significant price uptick over the last six months, investors may want to consider these metrics and tips as part of their comprehensive analysis. As of now, there are nine additional InvestingPro Tips available for IHG, providing a broader perspective on the company's financial health and market position.
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