Why Is Hilton Worldwide Holdings Inc. (HLT) Up 5.3% Since Last Earnings Report?
A month has gone by since the last earnings report for Hilton Worldwide Holdings Inc. (HLT). Shares have added about 5.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Hilton Worldwide Holdings Inc. due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Hilton Tops on Q4 Earnings & Revenues, Unveils '24 Outlook
Hilton reported impressive fourth-quarter 2023 results, wherein earnings and total revenues topped the Zacks Consensus Estimate and increased on a year-over-year basis.
The company’s quarterly results notably benefited from solid improvement in revenue per available room (RevPAR) on the back of increased occupancy rates and average daily rate (ADR). Furthermore, during the quarter, HLT witnessed a record number of openings, which encouraged the uptrend to a great extent. The company states that it is well-positioned to continue driving innovation and growth through 2024, owing to the improving trends.
Q4 in Detail
Hilton reported adjusted earnings per share (EPS) of $1.68, which beat the Zacks Consensus Estimate of $1.56 by 7.7%. The reported value grew 5.7% from the year-ago quarter’s reported adjusted EPS of $1.59.
Quarterly total revenues of $2.61 billion also topped the consensus mark of $2.57 billion by 1.6% and increased 6.8% year over year.
During the quarter, franchise and licensing fees improved 11.9% to $601 million year over year. Base and other management fees and incentive management fees rose 8% to $95 million and 20.3% to $77 million year over year, respectively. On the other hand, owned and leased hotels revenues declined 8.3% to $320 million compared with the year-ago quarter.
RevPAR and Adjusted EBITDA
In the quarter under review, system-wide comparable RevPAR grew 5.7% year over year (on a currency-neutral basis), owing to an increase in occupancy and ADR. Also, RevPAR was up 13.5% from 2019 levels. Our model predicted the reported quarter’s system-wide RevPAR to increase 5.5% year over year.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) during the fourth quarter was $803 million, up 8.5% year over year. Our estimated adjusted EBITDA was expected to inch up 0.5% year over year to $743.8 million.
2023 Highlights
Total revenues were up 16.7% to $10.24 billion compared with $8.77 billion reported in the year-ago period. During 2023, Hilton’s adjusted earnings were $6.21 per share, up 27% from 2022 reported earnings of $4.89 per share.
In 2023, system-wide comparable RevPAR (on a currency-neutral basis) grew 12.6% compared with the 2022 reported value and 10.7% compared with 2019 levels.
Hilton reported adjusted EBITDA of $3.09 billion in 2023, up 18.9% from $2.6 billion reported in 2022.
Balance Sheet
As of Dec 31, 2023, cash and cash equivalent balance (including restricted cash) was $875 million, up from $779 million reported in the prior quarter. As of the fourth quarter of 2023-end, Hilton reported long-term debt outstanding of $9.3 billion, up from $8.8 billion reported in the previous quarter, excluding deferred financing costs and discounts, with a weighted average interest rate of 4.78%.
During the quarter, Hilton repurchased 4.6 million shares of its common stock worth approximately $746 million. In 2023, the company repurchased a total of 15.6 million shares for $150.52 of average price per share.
Management declared a quarterly cash dividend of 15 cents per share. The dividend will be payable on Mar 28 to shareholders of record as of Feb 23, 2024.
Business Updates
During fourth-quarter 2023, Hilton opened a record number of new hotels, totaling 24,000 rooms. It also achieved net unit growth of 22,300 rooms.
As of Dec 31, 2023, Hilton’s development pipeline comprised nearly 3,270 hotels, with almost 462,400 rooms across 118 countries and territories, including 30 countries and territories where it currently has no running hotels.
Q1 & 2024 Outlook
For first-quarter 2024, Hilton anticipates net income in the range of $340-$359 million. Adjusted EBITDA is expected to be between $690 million and $710 million. It projects first-quarter EPS (adjusted for special items) to be between $1.36 and $1.44.
For first-quarter 2024, management forecasts system-wide RevPAR (on a currency-neutral basis) to increase in the 2-4% band on a year-over-year basis.
For 2024, the company estimates net income in the range of $1.69-$1.73 billion. Adjusted EBITDA is expected to be between $3.33 billion and $3.38 billion. It suggests general and administrative expenses for 2024 in the range of $415-$430 million.
Hilton expects 2024 EPS (adjusted for special items) in the range of $6.80-$6.94. Full-year capital return is anticipated to be approximately $3 billion.
Management anticipates 2024 system-wide RevPAR (on a currency-neutral basis) to increase 2-4% year over year. Net unit growth is estimated to be between 5.5% and 6%.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
VGM Scores
Currently, Hilton Worldwide Holdings Inc. has a nice Growth Score of B, a grade with the same score on the momentum front. However, 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Hilton Worldwide Holdings Inc. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Hilton Worldwide Holdings Inc. (HLT) : Free Stock Analysis Report
