Hilton (HLT) Surpasses Q2 Earnings Estimates, Ups 2019 View

Hilton Worldwide Holdings Inc. (NYSE:HLT) reported better-than-expected second-quarter 2019 results. Notably, the top line surpassed the consensus mark after missing it for five consecutive quarters while the bottom line surpassed the same for the fourth straight quarter.

Hilton’s adjusted earnings of $1.06 per share surpassed the consensus estimate of $1.01 and grew 23.3% on a year-over-year basis.

Revenues totaled $2,484 million, which exceeded the consensus mark of $2,445 million. Also, the reported figure improved 8.4% 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 second quarter of 2019, Hilton opened 123 hotels. It also achieved net unit growth of 15,700 rooms, marking roughly 7% increase from the prior-year quarter.

As of Jun 30, 2019, Hilton's development pipeline comprised nearly 2,490 hotels, with roughly 373,000 rooms throughout 109 countries and territories — including 37 countries and territories, where it currently does not have any running hotels. Moreover, 201,000 rooms in the development pipeline were located outside the United States and 192,000 rooms were under construction.

RevPAR and Adjusted EBITDA

In the quarter under review, system-wide comparable RevPAR increased 1.4% (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 ADR as well as occupancy rate.

At managed and franchised hotels, comparable RevPAR increased 1.3% in the second quarter. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were $618 million compared with $555 million in the prior-year quarter.

Hilton Worldwide Holdings Inc. Price, Consensus and EPS Surprise

Cash, Debt and Share Repurchase

As of Jun 30, 2019, cash and cash equivalent balance summed $718 million. No amounts were outstanding under the $1.75-billion Revolving Credit Facility. In the second quarter, the company repurchased 4.2 million shares of its common stock for roughly $383 million. Average price per share was $91.65.

In June 2019, Hilton paid out a quarterly cash dividend of 15 cents per share on its common stock for $43 million. In July, the company's board of directors authorized a regular quarterly dividend of 15 cents, to be paid out on or before Sep 27 to its shareholders of record as of the close of business on Aug 9.

Third-Quarter Outlook

For third-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 $1.04. Hilton projects system-wide RevPAR to increase 1-2% year over year on a comparable and 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 $3.78-$3.85 cents per share compared with $3.74-$3.84 guided earlier. The Zacks Consensus Estimate for the same is currently pegged at $3.87. System-wide RevPAR is anticipated to witness a year-over-year improvement of 1-2% on a comparable and currency-neutral basis (slightly lower than the previously mentioned 1-3%). Meanwhile, adjusted EBITDA is expected to be $2,280-$2,310 million, up from $2,265-$2,305 million stated previously.

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 6.5% net unit growth.

Zacks Rank & Stocks to Consider

Hilton currently has a Zacks Rank #4 (Sell). Some better-ranked stocks in the same space include Huazhu Group (NASDAQ:HTHT) , Peak Resorts (NASDAQ:SKIS) and Wyndham Destinations (NYSE:WYND) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Wyndham’s earnings for 2019 are expected to increase 14.9%. Peak Resorts and Huazhu Group’s earnings for the next fiscal year are expected to rise 45.5% and 37%, respectively.

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