IHG Shares a ‘Highly Attractive’ Long Term Story

Goldman Sachs analysts reiterated their bullish stance on InterContinental Hotels Group (LON: IHG) in a note this week, citing the company's long-term growth prospects supported by new co-branded credit card arrangements in the US.

The investment bank revealed it has upgraded its estimates to reflect the impact of the credit card deal, which enhances IHG's earnings growth outlook.

“We reiterate our Buy on IHG after reflecting the new co-branded credit card arrangements in the US,” Goldman Sachs wrote.

Despite the recent adjustments, the bank continues to see an approximately “15% total shareholder return” over the next 12 months.

“We continue to see upside for the shares on a 12-month view, albeit now more modest (c.15% TSR), supported by the enhanced long-term EPS growth algorithm, greater appreciation of the improved value of new signings and openings, and further shareholder return potential,” said Goldman.

In the long-term, Goldman Sachs views IHG as a standout investment in its European hotels coverage.

The analysts highlight the company's projected 15.5% compound annual EPS growth rate from 2023 to 2028, as well as a ~7% annual return for shareholders.

Additionally, they note that IHG boasts one of the sector's highest return on invested capital (ROIC), expected to reach approximately 50% by 2025.

The bank positions IHG as a “highly attractive story” within the sector over the long term.