- Shares jump 2% to new high on earnings beat
- New $800 million share buyback
- Operating profit tops $1 billion
Shares in Intercontinental Hotels Group (IHG) notched up another all-time high on Tuesday gaining 2% to £80.72, continuing a stellar rise which has seem gain 44% over the last year.
Underlying group operating profit for 2023 increased 25% to $1.02 billion comfortably beating analysts’ estimates pitched at $882 million.
Also pleasing investors was a new $800 million share buyback for 2024 which combined with an expected $200 million of dividends will take the total shareholder returns to $1 billion.
The strong run in the shares has been partly driven by persistent upward revisions to consensus earnings forecasts which have increased around 8% over the last year.
As expectations rise, it can be tougher for the company to match them and one fly in the ointment in today’s results was a slight miss in RevPAR (revenue per available room) growth with analysts expecting 17.2% compared with 16% reported.
WHAT DID THE COMPANY SAY?
CEO Elie Maalouf commented: ‘I was honoured to take over as IHG's group CEO in July and would like to thank our teams for delivering an excellent set of results.
‘Travel demand was strong across all markets, with RevPAR up 16% on last year and 11% ahead of the 2019 pre-pandemic peak.
‘We opened 275 hotels in 2023 and signed more than double that amount - 556 hotels - into our pipeline. Adjusting for the effect of the Iberostar hotels joining IHG's system, openings for the fourth quarter grew by 27% year‑on‑year and signings were up by 50%, representing one of our biggest ever quarters for development activity.’
WHAT THE EXPERTS ARE SAYING
Russ Mould, investment director at AJ Bell said: ‘Holiday Inn-owner InterContinental Hotels continues to demonstrate its recovery credentials as a rebound in global travel is reflected in a strong set of 2023 numbers.
‘Because InterContinental only owns a small proportion of its hotels and instead focuses on franchising and managing premises it is able to generate strong margins and grow without employing lots of capital. The company is taking advantage of that flexibility as it develops a growing pipeline of new sites.
Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author of the article (Martin Gamble) and the editor of the article (Steven Frazer) own shares in AJ Bell.
