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Hilton (HLT) Q1 Earnings Surpass Estimates, 2019 View Up

Zacks Equity Research

Hilton Worldwide Holdings Inc. HLT 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 third straight 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.

Hilton Worldwide Holdings Inc. Price, Consensus and EPS Surprise

Hilton Worldwide Holdings Inc. Price, Consensus and EPS Surprise | Hilton Worldwide Holdings Inc. Quote

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, Hilton repurchased 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. The Zacks Consensus Estimate for the same is currently pegged at $1.0. 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, Hilton projects adjusted earnings of $3.74-$3.84 cents per share compared with $3.66-$3.78 guided earlier. The Zacks Consensus Estimate for the same is currently pegged at $3.80. 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.

Zacks Rank & Key Picks

Hilton has a Zacks Rank #3 (Hold). Some better-ranked stocks in the same space include Huazhu Group Limited HTHT, Extended Stay America, Inc. STAY and Marriott Vacations Worldwide Corporation VAC, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Huazhu Group Limited, which was previously known as China Lodging Group Limited, has an impressive long-term earnings growth rate of 20.9%.

Extended Stay America reported better-than-expected earnings in all of the trailing four quarters, the average being 5.6%.

Marriott Vacations Worldwide’s long-term earnings growth rate is currently pegged at 9%.

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