Hotel company Hilton (NYSE:HLT) announced better-than-expected results in Q1 CY2024, with revenue down NaN% year on year to $2.57 billion. It made a non-GAAP profit of $1.53 per share, improving from its profit of $1.24 per share in the same quarter last year.
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Hilton (HLT) Q1 CY2024 Highlights:
- Revenue: $2.57 billion vs analyst estimates of $2.53 billion (1.7% beat)
- EPS (non-GAAP): $1.53 vs analyst estimates of $1.42 (8% beat)
- EPS (non-GAAP) Guidance for full year 2024 is $6.96 at the midpoint, below analyst estimates of $7.03 (but adjusted EBITDA guidance raised and above estimates)
- Gross Margin (GAAP): 90.4%, up from 89.1% in the same quarter last year
- Market Capitalization: $49.53 billion
Founded in 1919, Hilton Worldwide (NYSE:HLT) is a global hospitality company with a portfolio of hotel brands.
Hotels, Resorts and Cruise LinesHotels, resorts, and cruise line companies often sell experiences rather than tangible products, and in the last decade-plus, consumers have slowly shifted from buying "things" (wasteful) to buying "experiences" (memorable). In addition, the internet has introduced new ways of approaching leisure and lodging such as booking homes and longer-term accommodations. Traditional hotel, resorts, and cruise line companies must innovate to stay relevant in a market rife with innovation.
Sales GrowthA company's long-term performance can indicate its business quality. Any business can enjoy short-lived success, but best-in-class ones sustain growth over many years. Hilton's annualized revenue growth rate of 3.1% over the last five years was weak for a consumer discretionary business. Within consumer discretionary, a long-term historical view may miss a company riding a successful new property or emerging trend. That's why we also follow short-term performance. Hilton's annualized revenue growth of 25.9% over the last two years is above its five-year trend, suggesting some bright spots.
We can better understand the company's revenue dynamics by analyzing its revenue per available room, which clocked in at $104.16 this quarter and is a key metric accounting for average daily rates and occupancy levels. Over the last two years, Hilton's revenue per room averaged 18.7% year-on-year growth. Because this number is lower than its revenue growth, we can see its sales from other areas like restaurants, bars, and amenities outperformed its room bookings.
This quarter, Hilton reported robust year-on-year revenue growth of 12.2%, and its $2.57 billion of revenue exceeded Wall Street's estimates by 1.7%. Looking ahead, Wall Street expects sales to grow 9.9% over the next 12 months, a deceleration from this quarter.
Operating MarginOperating margin is an important measure of profitability. It’s the portion of revenue left after accounting for all core expenses–everything from the cost of goods sold to advertising and wages. Operating margin is also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.
Hilton has been a well-oiled machine over the last two years. It's demonstrated elite profitability for a consumer discretionary business, boasting an average operating margin of 22.6%. This quarter, Hilton generated an operating profit margin of 20.7%, down 1 percentage points year on year.
Over the next 12 months, Wall Street expects Hilton to become more profitable. Analysts are expecting the company’s LTM operating margin of 21.5% to rise to 25.6%.Key Takeaways from Hilton's Q1 Results It was good to see Hilton beat analysts' revenue and EPS expectations this quarter. Additionally, adjusted EBITDA guidance for the full year 2024 was raised and came in above expectations. On the other hand, its operating margin missed and its full-year earnings guidance fell short of Wall Street's estimates. While not perfect, this was still a solid quarter for Hilton. The stock is up 1.7% after reporting and currently trades at $200.5 per share.