Morgan Stanley Bullish On Intercontinental Hotels

In a new report, analysts at Morgan Stanley took an in-depth look at Intercontinental Hotels Group PLC (NYSE: IHG) ahead of the company’s Q1 earnings release coming next week. Overall, analysts are optimistic about the company’s Q1 performance and outlook for the remainder of 2015.

Forecast
Analysts expect 5.1 percent revenue per available room (RevPAR) growth from Intercontinental in Q1, in line with 4Q14. According to the report, every 1.0 percent growth in annual RevPAR results in a 2.5 percent increase in earnings per share (EPS). Analysts are forecasting a 5.2 percent year-over-year (Y/Y) increase in InterContinental’s RevPAR in 2015.

Regional expectations
Analysts expect a strong 7.0 percent RevPAR growth from the Americas in Q1. Mariott International Inc (NASDAQ: MAR), Starwood Hotels & Resorts Worldwide Inc (NYSE: HOT) and Hilton Worldwide Holdings Inc (NYSE: HLT) already reported RevPAR growth of 7.0 percent in Q1 and reiterated guidance of 5-7 percent growth for the remainder of 2015.

Analysts are forecasting 4.5 percent RevPAR growth in Europe, 2.0 percent RevPAR decline in China and 6.0 percent RevPAR growth in Africa, the Middle East, and the remainder of Asia during Q1.

Room expansion
Intercontinental grew its total number of rooms by 3.4 percent in 2014, but analysts expect strong Q1 growth numbers on the strength of the company’s recent deal with Kimpton. According to the report, Intercontinental boosted its total number of rooms by 12,000 from the Kimpton deal, and analysts are forecasting a 5.0 percent net room increase in Q1 as a result.

Outlook
Analysts note that Intercontinental has under-performed most of its peers so far in 2015, but they believe that the long-term investment case remains intact. Morgan Stanley has an Overweight rating on Intercontinental.