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Why Is Hilton Worldwide Holdings Inc. (HLT) Down 1.3% Since Last Earnings Report?

It has been about a month since the last earnings report for Hilton Worldwide Holdings Inc. (HLT). Shares have lost about 1.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Hilton Worldwide Holdings Inc. due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Hilton Q1 Earnings & Revenues Beat Estimates, Rise Y/Y

Hilton reported solid first-quarter 2023 results, with earnings and revenues beating the Zacks Consensus Estimate and rising year over year.

Q1 in Detail

Hilton reported adjusted earnings per share (EPS) of $1.24, beating the Zacks Consensus Estimate of $1.14. In the prior-year quarter, the company reported an adjusted EPS of 71 cents.

Quarterly revenues of $2,293 million surpassed the Zacks Consensus Estimate of $2,262 million and increased 33.2% from the year-ago quarter’s levels. During the quarter, franchise and licensing fees increased 23% year over year. Owned and leased hotels, base and other management fees and incentive management fees rose 65.3%, 45.5% and 91.2% year over year, respectively.

RevPAR and Adjusted EBITDA

In the quarter under review, system-wide comparable revenue per available room (RevPAR) increased 30% year over year (on a currency-neutral basis), owing to an increase in occupancy and average daily rate. Also, RevPAR was up 8% from 2019 levels.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) during the first quarter was $641 million compared with $448 million reported in the prior-year quarter.

Balance Sheet

As of Mar 31, 2023, cash and cash equivalent balance (including restricted cash) amounted to $978 million compared with $1,286 million reported in the previous quarter. The company reported long-term debt outstanding of $8.8 billion (sequentially flat), excluding deferred financing costs and discounts, with a weighted average interest rate of approximately 4.51%.

During the quarter, the company repurchased 3.2 million shares of its common stock worth approximately $446 million.

The company declared a quarterly cash dividend of 15 cents per share. The dividend will be payable on (or before) Jun 30, to shareholders of record as of May 19, 2023.

Business Updates

During first-quarter 2023, Hilton opened 64 new hotels. It also achieved net unit growth of nearly 5,300 rooms. During the quarter, the company unveiled its 100th Tapestry Collection by Hilton. It also announced the opening of its 500th hotel in China.

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As of Mar 31, 2023, Hilton's development pipeline comprised nearly 2,930 hotels, with nearly 428,100 rooms across 116 countries and territories — including 30 countries and territories where it currently has no running hotels. The pipeline includes the addition of the Waldorf Astoria Jaipur in India. For 2023, the company expects net unit growth in the range of 5-5.5%.

Outlook

For second-quarter 2023, the company anticipates net income in the range of $387-$401 million. Adjusted EBITDA is expected to be between $770 million and $790 million. The company expects second-quarter EPS (adjusted for special items) to be between $1.54 and $1.59.

For second-quarter 2023, the company anticipates system-wide RevPAR to increase between 10% and 12% on a year-over-year basis.

For 2023, the company anticipates net income in the range of $1,331-$1,385 million. Earlier, the company anticipated net income in the range of $1,382-$1,454 million. Adjusted EBITDA is expected to be between $2,875 million and $2,950 million. Earlier the company anticipated adjusted EBITDA to lie between $2,800 million and $2,900 million. General and administrative expenses for 2023 are now expected in the range of $390-$410 million.

The company expects 2023 EPS (adjusted for special items) in the range of $5.68-$5.88 compared with the previous projection of $5.42-$5.68. Full-year capital return is anticipated to be between $1.8 billion and $2.2 billion, up from the previous expectation of $1.7-$2.1 billion.

The company anticipates 2023 system-wide RevPAR to increase between 8% and 11% year over year compared with the previous projection of 4-8% range.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

VGM Scores

At this time, Hilton Worldwide Holdings Inc. has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Hilton Worldwide Holdings Inc. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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