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Hilton (HLT) Stock Up on Q2 Earnings Beat & Upbeat View

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Hilton Worldwide Holdings Inc. (HLT - Free Report) reported solid second-quarter 2022 results, with earnings and revenues beating the Zacks Consensus Estimate and rising year over year. While the bottom line beat the consensus estimate for the third straight quarter, the top line surpassed the same for the fifth consecutive time.

Following robust results, the company’s shares moved up 5.3% in the pre-market trading session. Positive investor sentiments were witnessed as the company reported better-than-expected guidance for 2022.

Christopher J. Nassetta, president & CEO of Hilton, stated, "Our second quarter results exceeded the high end of our guidance for system-wide comparable RevPAR, diluted EPS, adjusted for special items and Adjusted EBITDA. Given our strong results in the quarter, coupled with our confidence in continued recovery throughout the year, we are raising our full year guidance, including our outlook for capital return.”

Q2 in Detail

Hilton reported adjusted earnings per share (EPS) of $1.29, beating the Zacks Consensus Estimate of $1.05. In the prior-year quarter, the company reported an adjusted EPS of 56 cents.

Hilton Worldwide Holdings Inc. Price, Consensus and EPS Surprise

 

Hilton Worldwide Holdings Inc. Price, Consensus and EPS Surprise

Hilton Worldwide Holdings Inc. price-consensus-eps-surprise-chart | Hilton Worldwide Holdings Inc. Quote

 

Quarterly revenues of $2,240 million surpassed the consensus mark of $2,002 million. Moreover, the top line surged 68.5% from the year-ago quarter’s levels.

RevPAR and Adjusted EBITDA

In the quarter under review, system-wide comparable revenue per available room (RevPAR) increased 54.3% year over year (on a currency-neutral basis), owing to an increase in occupancy and average daily rate (ADR). However, RevPAR is down 2.1% compared with 2019 levels.

During the quarter, fee revenues increased 54% year over year. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) during the third quarter was $679 million compared with $400 million reported in the prior-year quarter.

Balance Sheet

As of Jun 30, 2022, cash and cash equivalent balance (including restricted cash) amounted to $1,254 million compared with $1,510 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 4.12%.

During the quarter, the company repurchased 3.6 million shares of its common stock worth approximately $480 million.

Meanwhile, the company declared a quarterly cash dividend of 15 cents per share. The dividend will be payable on (or before) Sep 23, 2022, to shareholders of record as of Aug 26, 2022.

Business Updates

During second-quarter 2022, Hilton opened 91 new hotels. It also achieved net unit growth of nearly 13,300 rooms. During the quarter, the company unveiled properties, including Waldorf Astoria Washington, D.C. and the Hotel Marcel New Haven, Tapestry Collection by Hilton. Additionally, it announced the opening of Hilton Maldives Amingiri, the Conrad Los Angeles and the Lost Property St. Paul's London (a Curio Collection hotel) in July.

As of Jun 30, 2022, Hilton's development pipeline comprised nearly 2,780 hotels, with nearly 413,000 rooms across 114 countries and territories — including 29 countries and territories where it currently does not have any running hotels. Moreover, 246,000 rooms in the development pipeline were located outside the United States and 195,000 rooms were under construction. For 2022, the company expects net unit growth to be nearly 5%.

Outlook

For third-quarter 2022, the company anticipates net income in the range of $303-$324 million. Adjusted EBITDA is expected to be between $660 million and $690 million. The company expects third-quarter diluted EPS (adjusted for special items) to be between $1.16 and $1.24.

For the third quarter, the company anticipates system-wide RevPAR to increase between 25- 30% on a year-over-year basis. Also, the metric is expected to increase 1-5% from 2019 levels.

For 2022, the company anticipates net income in the range of $1,146-$1,216 million, up from the previous estimate of $1,001-$1,071 million. Adjusted EBITDA is expected to be between $2,400-$2,500 million, up from the previous estimate of $2,250-$2,350 million. General and administrative expenses for 2022 are now expected in the range of $400-$420 million compared with the previous projection of $410 million and $430 million.

The company expects 2022 diluted EPS (adjusted for special items) in the range of $4.21-$4.46, up from the prior estimate of $3.77-$4.02. Full-year capital return is anticipated to be between $1.5 billion and $1.9 billion compared with the previous projection of $1.4 to $1.8 billion.

The company anticipates system-wide 2022 RevPAR to increase between 37-43% (compared with the previous projection of 32-38%) on a year-over-year basis. However, the metric is expected to decline 1-5% from 2019 levels.

Zacks Rank & Key Picks

Hilton currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the Consumer Discretionary sector are G-III Apparel Group, Ltd. (GIII - Free Report) , MGM Resorts International (MGM - Free Report) and Bluegreen Vacations Holding Corporation (BVH - Free Report) .

G-III Apparel sports a Zacks Rank #1. GIII has a trailing four-quarter earnings surprise of 97.5%, on average. The stock has declined 27.1% in the past year.

The Zacks Consensus Estimate for GIII’s current financial year sales and EPS indicates growth of 13.8% and 8.2%, respectively, from the year-ago period’s reported levels.

MGM Resorts carries a Zacks Rank #2 (Buy). MGM has a trailing four-quarter earnings surprise of 212.5%, on average. Shares of the company have declined 22% in the past year.

The Zacks Consensus Estimate for MGM’s current financial year sales and EPS suggests growth of 27.6% and 240.3%, respectively, from the year-ago period’s reported levels.

Bluegreen Vacations carries a Zacks Rank #2. BVH has a trailing four-quarter earnings surprise of 85.9%, on average. The stock has increased 44.3% in the past year.

The Zacks Consensus Estimate for BVH’s current financial year sales and EPS indicates growth of 11.2% and 35.1%, respectively, from the year-ago period’s reported levels.

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