Shares of Hilton Worldwide Holdings Inc. (NYSE: HLT) rose 7.5% on Wednesday after the company delivered upbeat results for the second quarter of 2022 and increased its projections for 2022.
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It is worth noting here that the company’s earnings and sales surprise in the quarter was 22.9% and 6.2%, respectively. The last closing price of this $36-billion resort and hotel company was $129.25 on Wednesday.
A Snapshot of Hilton Worldwide’s Q2 Results
In the quarter, the company’s adjusted earnings were $1.29 per share, above the Street consensus estimate of $1.05 per share and the company’s guidance range of $0.98 to $1.03 per share. On a year-over-year basis, the bottom line expanded 130.4% on the back of healthy sales growth, partially offset by a nearly 49% increase in the company’s total expenses.
Revenues totaled $2.24 billion, higher than the consensus estimate of $2.11 billion. The top line grew 68.5% from the year-ago quarter, driven by a 54.4% rise in sales from the Management and Franchise segment and a 133.1% surge in revenues from the Ownership segment.
Exiting the quarter, Hilton Worldwide had 6,983 properties, higher compared with 6,892 in the first quarter, and approximately 1.1 million rooms versus 1.08 million rooms in the previous quarter.
The company’s occupancy rate improved 1,230 basis points (bps) year-over-year to 70.8% in the quarter. The average daily rate in the quarter was $154.92, up 27.5% year-over-year. Also, revenue per available room (RevPAR) increased 54.3% to $109.62 in the quarter.
Adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) were $679 million, up 69.8% year-over-year. The adjusted EBITDA margin in the quarter grew 30 bps to 69.1%.
Hilton Worldwide’s Projections for Q3 & 2022
The company anticipates adjusted earnings in the range of $1.16-$1.24 per share in the third quarter. Adjusted EBITDA is forecast to be within the $660-$690 million range.
For 2022, the company has increased its earnings projection to $4.21-$4.46 per share from the earlier prediction of $3.77-$4.02 per share. Adjusted EBITDA is now forecast to be $2,400-$2,500 million in the year, higher than the $2,250-$2,350 million range stated earlier. RevPAR is projected to be 37%-43%, up from 32%-38% in the year-ago quarter.
In the year, the company expects to return $1.5-$1.9 billion to its shareholders versus the $1.4-$1.8 billion forecast earlier.
Capital Deployment by Hilton Worldwide
Exiting the first half of 2022, the company’s cash and cash equivalents were $1,175 million, while it generated a cash flow of $528 million from operating activities during the period.
From its cash resources, the company used $11 million on capital expenditure and $25 million to repay debts. At the end of the first half, the company’s long-term debt was $8,702 million. Also, the company paid dividends totaling $41 million and bought back shares worth $586 million in the first half of 2022.
In September 2022, the company will pay a quarterly dividend of $0.15 per share to its shareholders. Also, it is left to buy back shares worth $1.5 billion under its pre-authorized programs.
Analysts Are Cautiously Optimistic about HLT Stock
On TipRanks, analysts are cautiously optimistic about the prospects of Hilton Worldwide and have a Moderate Buy consensus rating based on three Buys and eight Holds. HLT’s average price target is $144.45, suggesting 12.85% upside from the current level. Shares of Hilton Worldwide have slipped a mere 0.2% over the past year.
Following the company’s results, Michael Bellisario of Robert W. Baird reiterated a Buy rating on HLT while increasing the price target to $156 (20.7% upside potential) from $154.
Website Traffic Hinted at HLT’s Upbeat Q2 Results
According to TipRanks, the total estimated visits to HLT’s website increased 39% year-over-year in the second quarter of 2022. Learn how Website Traffic can help you research your favorite stocks.
The uptick in the company’s website traffic underpins HLT’s upbeat performance (especially its top-line results) in the second quarter.
Key Takeaways for HLT Investors
Demand for Hilton Worldwide’s services is high, as suggested by its occupancy rate and RevPAR in the second quarter of 2022, and increased projections for 2022. Further, the company’s efforts to deal with high costs and expenses are expected to be beneficial in the quarters ahead. Rewarding its shareholders handsomely adds to HLT’s investment appeal.
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