Hilton stock climbs 5.7% as hotel operator beats earnings estimates and raises outlook

Shares of Hilton Worldwide Holdings Inc. soared 5.7% on Wednesday, after the hotel operator blew up past estimates — including its own — for the second quarter and forecast a continued recovery in travel for the rest of the year.

The company reported net income of $368 million, or $1.32 per share, for the period, compared with $130 million, or 46 cents per share, a year earlier. Adjusted earnings per share came in at $1.29, well ahead of the FactSet consensus of $1.05.

Revenue hit $2.240 billion from $1.329 billion a year ago, also ahead of the FactSet consensus of $2.110 billion.

The net profit figure beat the company’s forecast as system-wide comparable RevPAR, or revenue per available room, increased 54.3% on a currency-neutral basis.

“Given our strong results for the quarter, coupled with our confidence in the continued recovery throughout the year, we are raising our full-year guidance, including our outlook for capital return.” , CEO Christopher J. Nassetta said in a statement.

Hilton now expects full-year adjusted EPS of $4.21 to $4.46, versus FactSet consensus of $4.03. For the third quarter, he expects adjusted EPS of $1.16 to $1.24, versus the FactSet consensus of $1.15.

System-wide RevPAR is expected to increase by 37% to 43% from 2021, on a currency-neutral basis.

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On a call with analysts, Nassetta said Hilton expects to generate full-year adjusted EBITDA, or earnings before interest, taxes, depreciation and amortization, above 2019 levels and above. generate record free cash flow.

“In the second half of the year, based on the trends we’ve seen, we expect the transitional business to be somewhat on a revenue base equal to 2019 levels,” Nassetta said, according to a statement. FactSet transcript. “And then when we think of the group team, even if we don’t think of the second half, we’ll be back to where we were in 19. We’re going to be awfully close.

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The executive acknowledged the uncertain macro environment – including recession fears – and the short booking window as factors clouding the outlook. But the hospitality industry is benefiting from pent-up demand after more than two years of the coronavirus pandemic.

“We talk to our customers all the time, not just group customers. We talk to all of our customers,” he said. And the feedback in the fall is that “people need to travel more”.

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Hilton also benefits from a shift in spending towards services rather than goods as the world normalizes. This creates new demand in the leisure sector, he said.

Bernstein analysts hailed the “solid beat” and increased forecast, but stuck to their market performance rating on the stock and price target of $161, about 27% above of its current price.

“Even with year-to-date weakness, Hilton remains the best-performing hotel name during the pandemic, helped by the faster U.S. recovery so far,” the analysts led by Richard Clarke wrote in a statement. note to customers.

“This phenomenon is winding down and other Hilton regions have caught up (American ex-Americans leading, Europe recovering faster). The current level is a great entry point into Hilton for the longer term, but there are currently more exposed names in faster recovering segments,” they wrote.

Nassetta said the strength in Europe, where big cities like London are “raging” this summer, was a welcome surprise,

But Asia is a challenge, particularly China, where COVID-related lockdowns have proven disruptive and the outlook difficult to predict. Hilton is optimistic conditions in China will be different by the time of the Chinese Party Congress in October.

“I think it will be a while before we have a ton of Chinese travelers traveling overseas or one of us makes it to China,” he said. But domestic travel in China can be a big advantage given the size of the population.

Rising shares of Hilton pulled other hotel stocks higher on Wednesday with Wynn Resorts Ltd. WYNN,
+3.33%
up 1.6% and Marriott International Inc. MAR,
+4.34%
up 3.2%.

Hilton shares are down 18.6% year-to-date, while the S&P 500 SPX,
+2.62%
fell 16.6%.

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