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Jun 10, 2024 |
Hilton Worldwide Holdings Inc. (NYSE: HLT)$202.18 USD ( As of 06/07/24 ) |
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Data Overview
| 52 Week High-Low | $214.34 - $137.11 |
|---|---|
| 20 Day Average Volume | 1,703,095 |
| Beta | 1.31 |
| Market Cap | 50.55 B |
| Dividend / Div Yld | $0.60 / 0.30% |
| Industry | Hotels and Motels |
| Industry Rank | 214 / 248 (Bottom 14%) |
| Current Ratio | 0.84 |
| Debt/Capital | NA% |
| Net Margin | 11.41% |
| Price/Book (P/B) | NA |
| Price/Cash Flow (P/CF) | 28.12 |
| Earnings Yield | 3.51% |
| Debt/Equity | -3.60 |
| Value Score |  |
|---|---|
| P/E (F1) | 28.52 |
| P/E (F1) Rel to Industry | 11.22 |
| PEG Ratio | 1.77 |
| P/S (F1) | 4.81 |
| P/S (TTM) | 4.81 |
| P/CFO | 28.12 |
| P/CFO Rel to Industry | 0.99 |
| EV/EBITDA Annual | 25.09 |
| Growth Score |  |
|---|---|
| Proj. EPS Growth (F1/F0) | 14.17% |
| Hist. EPS Growth (Q0/Q-1) | 31.16% |
| Qtr CFO Growth | -14.77 |
| 2 Yr CFO Growth | 764.73 |
| Return on Equity (ROE) | -81.30% |
| (NI - CFO) / Total Assets | NA |
| Asset Turnover | 0.68 |
| Momentum Score | |
|---|---|
| 1 week Volume change | 4.58% |
| 1 week Price Cng Rel to Industry | 0.79% |
| (F1) EPS Est 1 week change | 0.00% |
| (F1) EPS Est 4 week change | 0.00% |
| (F1) EPS Est 12 week change | 0.23% |
| (Q1) EPS Est 1 week change | 0.00% |
Summary
Shares of Hilton have outperformed the S&P 500 in the past three months. The uptrend is likely to continue as the company reported impressive first-quarter 2019 earnings. Moreover, the company also raised 2019 earnings guidance. For 2019, Hilton projects adjusted earnings of $3.74-$3.84 cents per share compared with $3.66-$3.78 guided earlier. We believe that the improving economic indicators — along with expansion strategies, industry-leading loyalty program and asset-light business model — bode well for Hilton. For 2019, Hilton anticipates net unit growth of 6.5%. RevPAR growth has also been impressive. Notably, the company continues to make great progress in its luxury development strategy, anticipating double-digit luxury growth in the next several years. However, intense competition and cyclical nature of the industry are concerns. Moreover, a limited mix of luxury hotels is a disadvantage for the company.
Elements of the Zacks Rank
Agreement Estimate Revisions (60 days)
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67% Q1 (Current Qtr)Revisions: 6 Up: 2 Down: 4 |
100% Q2 (Next Qtr)Revisions: 6 Up: 0 Down: 6 |
71% F1 (Current Year)Revisions: 7 Up: 5 Down: 2 |
57% F2 (Next Year)Revisions: 7 Up: 4 Down: 3 |
Magnitude Consensus Estimate Trend (60 days)
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Upside Zacks Consensus Estimate vs. Most Accurate Estimate
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Surprise Reported Earnings History
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Average 4 Qtr Surprise |
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The data on the front page and all the charts in the report represent market data as of 06/07/24, while the report's text is as of 05/03/2019
Overview
Founded in 1919 and headquartered in McLean, VA, Hilton Worldwide Holdings Inc. (HLT) is a hospitality company that owns, leases, manages, develops, and franchises hotels and resorts. 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.
The company’s operations are organized in two distinct operating segments: (i) management and franchise (59.2% of total segmental revenues in 2018), and (ii) ownership (40.8%).
The management and franchise segment include all the hotels that the company manages for third-party owners, as well as all franchised hotels. Ownership segment includes hotels that are company-owned and entirely managed by the company.
On Jan 3, 2017, Hilton completed the spin-offs of a portfolio of hotels and resorts as well as its timeshare business into two independent, publicly traded companies - Park Hotels & Resorts, Inc. and Hilton Grand Vacations Inc. Also, the company put into effect its previously announced 1-for-3 reverse stock split on the same day.
Reasons To Buy:
Aggressive expansion strategies, industry-leading loyalty program coupled with an asset-light business model, bode well for Hilton.
Robust Brand Image & Impressive Earrings Trend Drive Stock Performance: Hilton is known for its scale, size, commercial platform and industry-leading brands. The company’s premier brands provide distinguished customer-centric services to preserve the brand image.
The company’s shares have gained 22% in the past three months compared with the S&P 500’s growth of 11%. The appreciation in share price can be attributed to the company’s better-than-expected earnings in nine of the trailing 10 quarters. In the trailing four quarters, Hilton’s earnings surpassed the Zacks Consensus Estimate with an average positive earnings surprise of 5.6%. Moreover, for 2019, the company projects adjusted earnings of $3.74-$3.84 cents per share compared with $3.66-$3.78 guided earlier. Estimates for both current quarter and year have also witnessed upward revisions over the past seven days.
Continual Expansion as Major Growth Driver: In a bid to maintain position as the fastest-growing global hospitality company, Hilton is continuing to drive unit growth. 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. During 2018, Hilton launched over 450 hotels, taking room count to more than 66,000, and achieved net unit growth of nearly 57,000 rooms, marking an increase of 10% from the same period of 2017.
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.
Hilton’s broad geographic diversity lowers the effect of volatility in individual markets. More than half of the company’s pipeline is located outside the United States. More than 30% of the pipeline is located in the Asia Pacific region, where demand has been high. Also, a growing middle-class population in China is creating demand for hospitality services. Further, Europe’s RevPAR trends are being supported by favorable exchange rates as well as strength in regions including Spain, the U.K., Germany, Turkey and more.Notably, the company continues to make great progress in its luxury development strategy, anticipating double-digit luxury growth in the next several years. Hilton’s new brands including Home2 Suites, Tru by Hilton, Tapestry Collection are also gaining momentum globally.
Capital-Light Business Model: Hilton has transformed into a capital-light operating business backed by the spin-offs of a portfolio of hotels and resorts as well as its timeshare business. Post-spinoff, the company expects to be a resilient, fee-driven business with disciplined strategies. In fact, the focus is expected to be on growing market share, units, free cash flow per share as well as preserving the company’s strong balance sheet and accelerating return of capital. Furthermore, as Hilton’s unit growth is mostly financed by third parties, the company is capable of generating substantial returns on minimal capital investment.
This asset-light model is anticipated to enable shareholders receive high returns on invested capital. In fact, in the first quarter, the company repurchased 3.9 million shares of its common stock for roughly $296 million for average price of $76.65 per share. In February, the company announced an additional share repurchase program worth $1.5 billion. It aims to strengthen its shareholders’ value through regular dividend payments and buybacks moving ahead. 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.
Strong Loyalty Program: Hilton has created one of the largest loyalty programs, Hilton Honors. With more than 90 million members, this network created an extremely valuable asset for the company. In 2017, it added over 11 million members to the program. Further, in 2018, more than 14 million members were added to Hilton Honors. In the meantime, innovations such as the Hilton Honors app continue to drive growth in the program. In addition to being the company’s fastest growing and lowest cost distribution channel, this app, launched in December 2017, also enables a differentiated customer experience. In fact, the loyalty program increased occupancy in 2018 by 20%. The Honors now account for roughly 60% of system-wide occupancy, which is up 170 basis points for the year.
Risks
- Cutthroat Competition: The hotel industry is highly competitive, as major hospitality chains with well-established and recognized brands are continuously expanding their global presence. Hilton is continuously facing intense competition from both large hotel chains and smaller independent local hospitality providers. Increasingly, the company also faces competition from new channels of distribution in the travel industry. Additional sources of competition include large companies that offer online travel services as part of their business model such as Alibaba, search engines such as Google and peer-to-peer inventory sources such as Airbnb and HomeAway that allow travelers to book stays on websites that facilitate the short-term rental homes and apartments from owners, thereby providing an alternative to hotel rooms. Unless Hilton counters these competitions with appropriate strategies, it may pose a concern to the company’s future profitability.
- Cyclical Nature of the Industry & Other Macro Woes Pose Concerns: The hospitality industry is cyclical and a worsening of global economic conditions might in turn dent Hilton’s revenues and profits. Consumer demand for services is closely linked to the performance of the general economy and is sensitive to business and personal discretionary spending levels. The decline in consumer demand due to adverse general economic conditions, poor travel patterns, lower consumer confidence and high unemployment can lower the revenues and profitability of Hilton owned properties. These factors can also reduce the company’s management and franchise fee revenues.
Meanwhile, in the United States, RevPAR growth is being pressurized by softer group performance and weakness in oil and gas markets, despite good leisure transient trends. Moreover, President Trump’s stringent policies on immigration and tourist visas seem to have impelled international visitors to rethink their vacation plans in the United States.
Hilton’s considerable international presence also makes it vulnerable to the economic conditions in various regions. In the Middle East, political unrest, lower government spending and increased hotel supply continue to hurt tourism and is concerning.
- Valuation Looks Irrational: As Hilton has outperformed the industry in a year, the stock’s valuation looks quite stretched. The stock has a trailing 12-month EV/EBITDA ratio of 17.97, which is below the high level of 31.17 scaled in a year. On the contrary, the trailing 12-month P/E ratio for the industry and the S&P 500 is 14.98 and 11.13, respectively.
Last Earnings Report
Quarter Ending 03/2024
| Report Date | Apr 24, 2024 |
|---|---|
| Sales Surprise | 0.67% |
| EPS Surprise | 8.51% |
| Quarterly EPS | 1.53 |
| Annual EPS (TTM) | 6.51 |
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.
Second-Quarter Outlook
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.
2019 View
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.
Recent News
Marriott Opens 7,000th Property, Eyes Asia-Pacific Expansion — Apr 10, 2019
Marriott announced that it opened the 7,000th property in Hong Kong. The new hotel, named The St. Regis Hong Kong, is part of the company’s luxury portfolio.
This move is in line with Marriott’s continual efforts to fortify presence around the globe. In order to be the largest hotel company in the world, it acquired Starwood in 2016. Ever since then, its distribution has more than doubled in Asia, and the Middle East & Africa combined.
Hilton Expands in Yunan, Continues to Drive Unit Growth — Jan 2, 2019
Hilton heavily relies on continual expansion to diversify its revenue stream and strengthen its brand portfolio. To this end, the company recently announced the opening of Hilton Garden Inn Nujiang in Yunnan province. The property is owned by Nujiang Zhengge Hotel Management Co., Ltd, and managed by Hilton. Situated in a convenient location, Hilton Garden Inn Nujiang is the only international hotel in Nujiang.
The move underscores Hilton's efforts to expand into international markets and strengthen its brand name. Recently, the company also announced the opening of DoubleTree by Hilton Huidong Resort in Huizhou.
Hilton Eyes Expansion, Opens Hotel in Central Vietnam — Dec 20, 2018
Hilton has been constantly focusing on unit growth. To this end, the company announced the opening of a hotel named Hilton Da Nang in Central Vietnam under its flagship brand Hilton Hotels & Resorts. This is the third Hilton hotel in the country after Hilton Hanoi Opera and Hilton Garden Inn Hanoi.
Industry Analysis(1)Zacks Industry Rank: NA
Top Peers
| Hyatt Hotels Corporation (H) |
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| Sands China Ltd. (SCHYY) |
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| Intercontinental Hotels Group (IHG) |
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| Oriental Land (OLCLY) |
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| Hilton Grand Vacations Inc. (HGV) |
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| H World Group Limited Sponsored ADR (HTHT) |
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| Bally's Corporation (BALY) |
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| Choice Hotels International, Inc. (CHH) |
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| Wyndham Hotels & Resorts (WH) |
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Industry Comparison Hotels And Motels | Position in Industry: 2 of 14 |
Industry Peers |
| HLT |
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|---|---|
| Market Cap | 50.55 B |
| # of Analysts | 7 |
| Dividend Yield | 0.30% |
| Value Score | |
| Cash/Price | 0.03 |
| EV/EBITDA | 25.09 |
| PEG Ratio | 1.77 |
| Price/Book (P/B) | NA |
| Price/Cash Flow (P/CF) | 28.12 |
| P/E (F1) | 28.52 |
| Price/Sales (P/S) | 4.81 |
| Earnings Yield | 3.51% |
| Debt/Equity | -3.60 |
| Cash Flow ($/share) | 7.19 |
| Growth Score | |
| Hist. EPS Growth (3-5 yrs) | 31.16% |
| Proj. EPS Growth (F1/F0) | 14.17% |
| Curr. Cash Flow Growth | 17.23% |
| Hist. Cash Flow Growth (3-5 yrs) | 8.61% |
| Current Ratio | 0.84 |
| Debt/Capital | NA% |
| Net Margin | 11.41% |
| Return on Equity | -81.30% |
| Sales/Assets | 0.68 |
| Proj. Sales Growth (F1/F0) | 10.63% |
| Momentum Score | |
| Daily Price Chg | 0.50% |
| 1 Week Price Chg | 0.79% |
| 4 Week Price Chg | -2.84% |
| 12 Week Price Chg | -1.21% |
| 52 Week Price Chg | 42.85% |
| 20 Day Average Volume | 1,703,095 |
| (F1) EPS Est Wkly Chg | 0.00% |
| (F1) EPS Est Mthly Chg | 0.00% |
| (F1) EPS Est Qtrly Chg | 0.23% |
| (Q1) EPS Est Mthly Chg | 0.00% |
| X Industry | S&P 500 |
|---|---|
| 4.85 B | 33.94 B |
| 4 | 18 |
| 0.09% | 1.58% |
| - | - |
| 0.09 | 0.04 |
| 11.68 | 14.63 |
| 1.81 | 2.14 |
| 2.02 | 3.34 |
| 14.70 | 13.54 |
| 21.08 | 18.26 |
| 2.03 | 2.70 |
| 4.18% | 5.47% |
| 0.34 | 0.62 |
| 2.42 | 8.64 |
| - | - |
| 26.53% | 9.87% |
| 6.07% | 7.49% |
| 13.33% | 3.70% |
| 5.86% | 6.81% |
| 0.84 | 1.22 |
| 48.14% | 39.29% |
| 8.37% | 11.99% |
| 8.44% | 16.63% |
| 0.50 | 0.54 |
| 4.23% | 3.99% |
| - | - |
| 0.00% | -0.11% |
| 0.00% | 1.32% |
| -3.89% | 2.38% |
| -9.27% | 4.49% |
| -12.04% | 24.38% |
| 160,878 | 2,016,919 |
| 0.00% | 0.00% |
| 0.00% | 0.00% |
| 0.36% | 0.36% |
| 0.00% | 0.00% |
| H | SCHYY | IHG |
|---|---|---|
| 14.69 B | 19.00 B | 16.44 B |
| 9 | ||
| 0.41% | 0.00% | 1.99% |
 | | |
| 0.06 | NA | 0.08 |
| 15.93 | NA | 14.14 |
| NA | NA | 1.52 |
| 4.01 | NA | NA |
| 17.87 | NA | 21.35 |
| 43.52 | 14.67 | 23.62 |
| 2.19 | NA | NA |
| 2.30% | 6.82% | 4.23% |
| 0.63 | NA | -1.32 |
| 8.12 | -0.98 | 4.75 |
| |  |
| NA | NA | NA |
| 30.27% | 86.05% | 14.18% |
| 80.78% | 182.27% | 18.05% |
| 6.78% | NA | 1.77% |
| 0.59 | NA | 0.97 |
| 38.63% | NA | NA |
| 10.21% | NA | NA |
| 8.44% | NA | NA |
| 0.54 | NA | NA |
| 2.21% | 24.86% | 6.59% |
| | |
| -0.36% | -1.39% | -0.84% |
| -1.57% | -2.09% | -0.15% |
| -4.63% | -7.96% | 1.46% |
| -5.50% | -13.01% | -3.11% |
| 25.55% | -32.71% | 45.90% |
| 423,238 | 42,738 | 160,878 |
| 0.00% | 0.00% | 0.00% |
| 3.25% | 0.00% | 0.70% |
| 1.29% | NA | 3.21% |
| 3.19% | NA | NA |
Zacks Stock Rating System
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Zacks Recommendation
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| Value Score |
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| Growth Score |
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| Momentum Score |
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| VGM Score |
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Zacks Style Score Education
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Disclosures
This report contains independent commentary to be used for informational purposes only. The analysts contributing to this report do not hold any shares of this stock. The analysts contributing to this report do not serve on the board of the company that issued this stock. The EPS and revenue forecasts are the Zacks Consensus estimates, unless otherwise indicated in the report’s first-page footnote. Additionally, the analysts contributing to this report certify that the views expressed herein accurately reflect the analysts' personal views as to the subject securities and issuers. ZIR certifies that no part of the analysts' compensation was, is, or will be, directly or indirectly, related to the specific recommendation or views expressed by the analyst in the report.
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