Hilton Stock Up 12% in 3 Months: Can the Rally Continue?

SUMMARY – HILTON’S STOCK SURGES 12% IN 3 MONTHS DUE TO UNIT EXPANSION, REVPAR GROWTH, AND LOYALTY PROGRAM SUCCESS, WHILE AN UPGRADED FINANCIAL OUTLOOK FURTHER ENHANCES ITS PERFORMANCE AND GROWTH PROSPECTS.

Hilton Worldwide Holdings Inc (HLT) has witnessed a 12% surge in its stock price over the past three months, outperforming the industry’s growth of 8.5%. This success can be attributed to Hilton’s focused efforts on expanding its units, converting hotels, establishing strategic partnerships, and enhancing loyalty programs.

With an impressive long-term earnings growth rate of 44.5%, this Zacks Rank #3 (Hold) company is poised for continued success. In the last 30 days, earnings estimates for 2022 and 2023 have been revised upward by 0.4% each, reaching $4.49 per share and $5.40 per share, respectively.

Driven by Unit Expansion and New Brand Launch

To solidify its position as the fastest-growing global hospitality company, Hilton is actively pursuing unit growth strategies. During the third quarter of 2022, the company opened 80 new hotels, adding approximately 12,100 rooms. Notably, Hilton recently introduced the Curio Collection, its 600th property under the Hilton Hotels & Resorts brand.

Hilton’s development pipeline is robust, with nearly 2,810 hotels and around 416,000 rooms spread across 112 countries and territories. Remarkably, this includes 29 countries and territories where the company currently does not have any operational hotels. With 242,600 rooms outside the United States and 204,200 rooms under construction, Hilton expects a net unit growth of approximately 5% in 2022.

RevPAR Growth Boosts Performance

The company has experienced growth in revenue per available room (RevPAR), a key performance indicator. In the third quarter of 2022, system-wide comparable RevPAR increased by an impressive 29.9% (currency-neutral basis) compared to the previous year, driven by higher occupancy rates and average daily rates. RevPAR also showed a 5% improvement compared to 2019 levels.

The RevPAR growth can be attributed to robust leisure transient trends and improving business activity. Particularly, Hilton witnessed significant RevPAR gains in Europe, the Middle East, and Africa due to strong leisure demand and international inbound travel during the summer season. As a result, Hilton now expects system-wide RevPAR for 2022 to increase by 40-43% year-over-year, surpassing the previous estimate of 37-43%.

Hilton has successfully established one of the largest loyalty programs in the industry, known as Hilton Honors. Boasting over 115 million members, this network has become a valuable asset for the company. Moreover, innovations like the Hilton Honors app continue to contribute to Hilton’s growth.

Upgraded Financial Outlook

Hilton’s strong performance is reflected in its upgraded financial outlook for 2022. The company has revised its net income expectations to be between $1,219 million and $1,240 million, which is higher than the previous estimate of $1,146 million to $1,216 million. Adjusted EBITDA is projected to be between $2,500 million and $2,530 million, compared to the previous range of $2,400 million to $2,500 million.

General and administrative expenses for 2022 are now anticipated to be in the range of $380 million to $400 million, down from the initial projection of $400 million to $420 million. As a result, Hilton expects diluted EPS (adjusted for special items) for 2022 to range from $4.46 to $4.54, an increase from the prior estimate of $4.21 to $4.46.