It has been about a month since the last earnings report for Hilton (HLT - Free Report) . Shares have lost about 1.7% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Hilton due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Hilton Q1 Earnings Surpass Estimates, 2019 View Up
Hilton has reported mixed first-quarter 2019 results, wherein earnings surpassed the Zacks Consensus Estimate but revenues lagged the same. Notably, the top line missed the consensus mark for the fifth straight quarter, while the bottom line surpassed the estimate for the thirdstraight quarter.
Hilton’s adjusted earnings of 80 cents per share surpassed the consensus estimate of 76 cents and increased 16% on a year-over-year basis.
Revenues totaled $2,204 million, which missed the consensus mark of $2,224 million. However, the reported figure increased 6.3% from the year-ago quarter number on higher comparable revenue per available room (RevPAR).
The company primarily gained from increased average daily rate (ADR) and continual unit expansion. During the first quarter of 2019, Hilton opened 85 new hotels. It also achieved net unit growth of 10,000 rooms, indicating roughly 41% increase from the prior-year quarter.
As of Mar 31, 2019, Hilton's development pipeline comprised more than 2,480 hotels, with more than 371,000 rooms throughout 108 countries and territories including 37 countries and territories, where Hilton currently does not have any running hotels. Moreover, 200,000 rooms in the development pipeline were located outside the United States and 193,000 rooms were under construction.
RevPAR and Adjusted EBITDA
In the quarter under review, system-wide comparable RevPAR increased 1.8% (on a currency-neutral basis) and was at the lower end of the company’s guidance of 1-3%. The uptick was driven by growth in ADR as well as occupancy rate.
At managed and franchised hotels, comparable RevPAR increased 1.7% in the first quarter. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were $499 million compared with $445 million in the prior-year quarter.
Cash, Debt and Share Repurchase
As of Mar 31, 2019, cash and cash equivalent balance summed $461 million. Long-term debt outstanding was $7.4 billion. In the first quarter, Hiltonrepurchased 3.9 million shares of its common stock for roughly $296 million. Average price per share was $76.65. In February, the company announced an additional share repurchase program worth $1.5 billion.
In March 2019, Hilton paid a quarterly cash dividend of 15 cents per share on its common stock for $44 million. In April, the company's board of directors authorized a regular quarterly dividend of 15 cents, payable on or before Jun 28 to its shareholders of record as of the close of business on May 17.
For second-quarter 2019, the company anticipates adjusted earnings between 98 cents and $1.03 per share. Hilton projects system-wide RevPAR to increase 1-2% year over year on a comparable as well as currency-neutral basis. Adjusted EBITDA is envisioned to be $590-$610 million. Also, the company expects management and franchise fee revenues to improve 6-8% year over year.
For 2019, Hiltonprojects adjusted earnings of $3.74-$3.84 cents per share compared with $3.66-$3.78 guided earlier. System-wide RevPAR is anticipated to witness a year-over-year improvement of 1-3% on a comparable and currency-neutral basis. Meanwhile, adjusted EBITDA is expected to be $2,265-$2,305 million.
Additionally, the company continues to expect a 7-9% increase in management and franchise fee revenues on a year-over-year basis. It also continues to anticipate a 6.5%net unit growth.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
Currently, Hilton has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Hilton has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.