It has been about a month since the last earnings report for Hilton Worldwide Holdings Inc. (HLT). Shares have added about 7.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Hilton Worldwide due for a pullback? 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's Q3 Earnings & Revenues Surpass Estimates
Hilton reported third-quarter 2024 results, with earnings and revenues beating the Zacks Consensus Estimate. Both the metrics increased on a year-over-year basis.
The company's performance was backed by notable improvements in revenue per available room (RevPAR), attributed to higher occupancy rates and average daily rates (ADR).
HLT’s Q3 in Detail
Hilton reported adjusted earnings per share (EPS) of $1.92, beating the Zacks Consensus Estimate of $1.85. The reported value rose 15% from the year-ago quarter’s adjusted EPS of $1.67.
In the quarter, franchise and licensing fees improved 8.6% to $698 million year over year. Our estimate for the metric was $708.3 million.
Base and other management fees rose 8.6% to $88 million, while incentive management fees were up 4.8% to $66 million year over year. Our model predicted management and incentive management fees to be at $96.8 million and $70.8 million, respectively.
Owned and leased hotels’ revenues moved down 1.5% year over year to $330 million compared with the year-ago quarter’s level. Our estimate for the metric was $368.1 million.
RevPAR and Adjusted EBITDA
In the quarter under review, system-wide comparable RevPAR grew 1.4% year over year (on a currency-neutral basis), owing to an increase in occupancy and ADR.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) in the third quarter were $904 million, up 8.4% year over year. Our estimated adjusted EBITDA was $878.5 million.
Balance Sheet
As of Sept. 30, 2024, cash and cash equivalent was $1,580 million, up from $731 million reported in the prior quarter. As of the third quarter of 2024, Hilton reported long-term debt outstanding (including current maturities) of $11.2 billion, up from $10.2 billion reported in the previous quarter, excluding deferred financing costs and discounts, with a weighted average interest rate of 4.84%.
In the quarter, Hilton repurchased 3.3 million shares of its common stock worth approximately $764 million.
Management declared a quarterly cash dividend of 15 cents per share. The dividend will be payable on Dec. 27 to its shareholders of record as of Nov. 15, 2024.
Business Updates
In third-quarter 2024, Hilton opened 531 new hotels. It achieved net room growth of 33,600 .
In the quarter, HLT made NoMad, Graduate by Hilton and Small Luxury Hotels of the World (“SLH”) available for reservations through its booking channels. The addition of SLH properties expanded the company's hotel portfolio to 10 more countries and territories. The company continued to expand HLT’s portfolio in the Asia Pacific market with more than 900 hotels, including the opening of its 700th hotel in China. The Spark by Hilton brand also grew with more than 20 new hotels, including the first in Canada, opened in the third quarter.
As of Sept. 30, 2024, Hilton's development pipeline comprised nearly 3,525 hotels, with almost 492,400 rooms across 120 countries and territories — including 28 countries and regions where it currently has no running hotels. For 2024, the company expects net unit growth in the range of 7-7.5%.
HLT’s Q4 & 2024 Outlook
For fourth-quarter 2024, Hilton anticipates net income in the range of $371-$395 million. Adjusted EBITDA is expected to be between $804 million and $834 million. It predicts fourth-quarter EPS (adjusted for special items) to be between $1.57 and $1.67.
For fourth-quarter 2024, management forecasts system-wide RevPAR (on a currency-neutral basis) to increase in the band of 1-2% on a year-over-year basis.
For 2024, the company now estimates net income in the range of $1,405-$1,429 million, down from the previous estimate of $1,532-$1,555 million. Adjusted EBITDA is expected to be between $3,375 million and $3,405 million. It predicts general and administrative expenses for 2024 in the range of $415-$430 million.
Hilton expects 2024 EPS (adjusted for special items) in the range of $6.93-$7.03. Full-year capital return is anticipated to be $3 billion.
Management anticipates 2024 system-wide RevPAR (on a currency-neutral basis) to increase 2-2.5% year over year, down from the prior estimate of 2-3% growth.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
The consensus estimate has shifted -5.46% due to these changes.
VGM Scores
Currently, Hilton Worldwide has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Hilton Worldwide has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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