Intercontinental Hotels Group PLC (LSE:IHG), the owner of Holiday Inn and other hotel brands, saw its shares slip by more than 3% on the back of some strong third-quarter results but analysts reckon the decline is unwarranted.
RevPAR (revenue per average room) rose around 10.5% in the quarter, ahead of estimates from analysts at Bank of America, who had predicted a rise of 9% for the period.
Experts at the US bank have therefore upgraded RevPAR forecasts for the full year to signify a 16% year-on-year jump, which in turn resulted in a 1% increase to underlying earnings guidance of around US$1 billion – around 3% higher than company consensus.
As a result of these increases, share price targets for the hotelier have been upped from 7,200p to 7,500p by the investment bank’s analysts.
Analysts also reckon the group could launch a share buyback worth US$500 million per annum, although details won't be confirmed by the group until February next year.
“Shares trade on 12x EV/EBITDA, which is a 16% discount to US peers - we think this is unjustified, given IHG’s high returns (>30% ROIC), earnings growth (15% 2023-27E) and cash return potential,” Bank of America analysts added, rating the stock a 'buy'.
Shares in IHG have risen by more than 23% in the year-to-date, having opened trading on Friday at around 6,000p.