On Monday, Jefferies analyst David Katz upgraded Hilton Worldwide Holdings Inc. (NYSE:HLT) stock rating from Hold to Buy and increased the price target to $296 from the previous $228. The adjustment reflects confidence in the company’s business model, which Katz believes is well-positioned to grow despite the current uncertain economic climate. According to InvestingPro data, Hilton maintains impressive gross profit margins of 76.5% and has demonstrated strong financial health with an overall score of "GREAT."
Katz pointed out that Hilton’s shares are trading at a mid-range multiple, between 15.1X and 16.7X, which is below the peak multiples of 17.5X for Marriott and 19.5X for Hilton that he considers appropriate. Current InvestingPro data shows Hilton trading at a P/E ratio of 38x and an EV/EBITDA multiple of 27.4x, with revenue growing at 5.2% over the last twelve months. The analyst emphasized the shift from cyclical revenue per available room (RevPAR) to more durable mid-single-digit net unit growth (MSD NUG) as the main driver of core earnings growth. This shift provides greater visibility and is expected to contribute to long-term growth in fees, EBITDA, and free cash flow with a high single-digit/low double-digit compound annual growth rate (CAGR).
Katz’s commentary underlines the earnings growth and durability of both Marriott and Hilton, suggesting that they warrant a higher valuation. He noted that the resilience of their business models has been demonstrated over the past several years, including during the COVID-19 pandemic and amidst current market volatility. The proven durability of growth, according to Katz, is unmatched in his coverage area, with net unit growth maintaining as the core model driver despite fluctuating and often weak RevPAR since 2017. Based on InvestingPro’s Fair Value analysis, Hilton appears to be trading above its Fair Value, though the company shows strong return metrics with a 9.8% return on assets.
The analyst’s perspective is that the historical performance of C-corporations like Hilton has consistently delivered mid-single-digit NUG on highly cyclical RevPAR, which justifies a more optimistic valuation of their stocks. The upgrade and new price target suggest that Jefferies sees a favorable outlook for Hilton’s stock performance in the face of ongoing economic challenges. Investors seeking deeper insights can access Hilton’s comprehensive Pro Research Report, along with 13 additional ProTips and extensive financial metrics, through an InvestingPro subscription.
In other recent news, Hilton Worldwide Holdings Inc. reported its Q1 2025 earnings, surpassing analysts’ expectations with an adjusted EPS of $1.72, compared to the forecasted $1.62. However, the company’s revenue of $2.7 billion fell slightly short of the anticipated $2.73 billion. Despite this revenue miss, Hilton’s strong earnings performance has bolstered investor confidence. The company also opened 186 hotels in the first quarter, marking a 20% increase year-over-year, and maintains a robust development pipeline with over 503,000 rooms. Hilton’s strategic focus on expanding its luxury and lifestyle categories continues to be a key growth driver. Additionally, Deutsche Bank analysts have shown interest in Hilton’s strategic responses to potential economic uncertainties. In terms of future outlook, Hilton projects full-year adjusted EPS to range between $7.76 and $7.94, with expected adjusted EBITDA between $3.65 billion and $3.71 billion. The company anticipates maintaining a 6-7% net unit growth in 2025.
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