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Hilton (HLT) Q4 Earnings and Revenues Surpass Estimates

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Hilton Worldwide Holdings Inc. HLT reported better-than-expected fourth-quarter 2017 results.

Adjusted earnings per share of 54 cents outpaced the Zacks Consensus Estimate by 10 cents but decreased 22.9% year over year. Nonetheless, the bottom line came well ahead of the guided range of 41-45 cents. Total revenues of $2.28 billion also surpassed the consensus mark by $20 million and were up 23.9% from the year-ago quarter.

Shares barely moved in the after-hours trading.  However, in the last twelve months, the stock has rallied a whopping 45.1% outperforming the industry’s 36.3% gain.

Notably, Hilton ended 2017 with total 2,257 hotels containing roughly 345,000 rooms across the globe. In the fourth quarter, the company opened 123 hotels containing 19,100 rooms, resulting in a net unit growth of 18,400 rooms.

Moreover, the company’s newest brands Canopy, Curio — A Collection, Home2 Suites, Tapestry Collection and Tru together contributed 20% to the room openings in 2017.

We note that improving economic indicators have been a blessing for the hotel industry as these have perked up leisure and business travel demand. Under such circumstances, aggressive expansion strategies, industry-leading loyalty program coupled with an asset-light business model bode well for Hilton.

Let’s check out some other details.

RevPAR and Adjusted EBITDA

In the quarter under review, system-wide comparable revenue per available room (RevPAR) increased 3.8% (on a currency-neutral basis) higher than the guided range of 1% to 3%. The improvement was driven by growth in occupancy and average daily rate (ADR). Strength at the company’s international hotels also contributed to the increase.

RevPAR at comparable managed and franchised hotels increased 3.7% and 2.4%, respectively, in the fourth quarter. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) rose $498 million, up 10% year over year. Furthermore, solid RevPAR growth and efficient cost control positively impacted EBITDA growth.

Cash, Debt and Share Repurchase

As of Dec 31, 2017, cash and cash equivalents balance was $670 million lower than $1.7 billion as of Dec 31, 2016. Long-term debt was $6.7 billion compared with $10.2 billion at the end of 2016. In the fourth quarter, the company repurchased 3.5 million shares of its common stock for roughly $266 million and an average price per share of $74.67.

Hilton Worldwide Holdings Inc. Price, Consensus and EPS Surprise

First-Quarter 2018 Outlook

For the first quarter of 2018, adjusted earnings per share are anticipated to lie between 43 cents and 47 cents. The Zacks Consensus Estimate is pegged at 48 cents. Hilton projects system-wide RevPAR to witness a year-over-year increase of 1% to 3% on a comparable and currency-neutral basis. Adjusted EBITDA is envisioned in the $410-$430 million band. Also, the company expects management and franchise fee revenues to increase in the band of 8-10% year over year.

Full-Year 2018 View

For 2018, adjusted earnings per share are projected within $2.49-$2.60 cents. The Zacks Consensus Estimate is pegged at $2.52. System-wide RevPAR is anticipated to witness a year-over-year improvement of 1% to 3% on a comparable and currency-neutral basis. Meanwhile, adjusted EBITDA is expected in the range of $2.03-$2.08 billion, increasing at 6-9%.

Also, the company management and franchise fee revenues to increase in the band of 8-10% year over year. Net unit growth is anticipated to be approximately 6.5%.

Zacks Rank & Other Stocks to Consider

Hilton carries a Zacks Rank #2 (Buy).

Other top-ranked stocks in the hotel space include Choice Hotels CHH sporting a Zacks Rank #1 (Strong Buy) as well as Intercontinental Hotels IHG and Marriott (MAR - Free Report) , each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Choice Hotels, Intercontinental Hotels and Marriott’s earnings for 2018 are projected to increase 20%, 30% and 21.6%, respectively.

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