Hilton (HLT) Q3 Earnings Surpass Estimates, Hikes '19 View

Hilton Worldwide Holdings Inc. (NYSE:H) reported third-quarter 2019 results wherein both earnings and revenues surpassed the respective Zacks Consensus Estimate. While the bottom line beat the estimates for the fifth straight quarter, the top line surpassed the consensus mark for the second consecutive quarter.

Hilton’s adjusted earnings of $1.05 per share surpassed the consensus estimates of $1.02 and improved 13% on a year-over-year basis.

Revenues totaled $2,395 million, which surpassed the consensus mark of $2,377 million. Moreover, the reported figure improved 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 third quarter of 2019, Hilton opened 118 hotels. It also achieved net unit growth of 15,600 rooms, marking an improvement of roughly 7% from the prior-year quarter.

As of Sep 30, 2019, Hilton's development pipeline comprised nearly 2,530 hotels, with roughly 379,000 rooms throughout 111 countries and territories — including 35 countries and territories, where it currently does not have any running hotels. Moreover, 205,000 rooms in the development pipeline were located outside the United States and 198,000 rooms were under construction.

Hilton Worldwide Holdings Inc. Price, Consensus and EPS Surprise

RevPAR and Adjusted EBITDA

In the quarter under review, system-wide comparable RevPAR increased 0.4% (on a currency-neutral basis) and was at the lower end of the company’s guidance of 1-2%. This uptick was driven by growth in occupancy rate.

At managed and franchised hotels, comparable RevPAR increased 0.3% in the third quarter. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were $605 million compared with $557 million in the prior-year quarter.

Cash, Debt and Share Repurchase

As of Sep 30, 2019, cash and cash equivalent balance amounted to $809 million. No amounts were outstanding under the $1.75-billion Revolving Credit Facility. In the third quarter, the company repurchased 4.5 million shares of its common stock for roughly $422 million. Average price per share was $94.72.

In June 2019, Hilton paid out a quarterly cash dividend of 15 cents per share on its common stock for $43 million. In October, the company's board of directors authorized a regular quarterly dividend of 15 cents, to be paid out on or before Dec 27 to its shareholders of record as of the close of business on Nov 8.

Q4 Outlook

For fourth-quarter 2019, the company anticipates adjusted earnings between 91 cents and 96 cents per share. The Zacks Consensus Estimate for the same is currently pegged at 99 cents. Hilton projects system-wide RevPAR to be nearly flat on a currency-neutral basis. Adjusted EBITDA is envisioned to be $563-$583 million. Moreover, the company anticipates management and franchise fee revenues to improve 3-5% year over year.

2019 View

For 2019, Hilton projects adjusted earnings of $3.81-$3.86 cents per share compared with $3.78-$3.85 guided previously. The Zacks Consensus Estimate for the same is currently pegged at $3.86. System-wide RevPAR is anticipated to witness year-over-year improvement of nearly 1% on a comparable and currency-neutral basis (lower than the previously guided 1-2%). Meanwhile, adjusted EBITDA is expected to be $2,285-$2,305 million, up from $2,265-$2,305 million stated previously.

Additionally, the company anticipates an increase of 7-8% in management and franchise fee revenues on a year-over-year basis. It also continues to anticipate 6.5% net unit growth.

Hilton, which share space with Marriott (NASDAQ:MAR) , Choice Hotels International (NYSE:H) and Hyatt (NYSE:H) currently has a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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