Hilton Worldwide Holdings Inc. HLT reported better-than-expected earnings for the sixth straight quarter, when the company posted first-quarter 2018 results. However, revenues missed the Zacks Consensus Estimate after delivering a beat in each of the preceding six quarters.
Following the results not much movement was witnessed in the stock yesterday. In the past six months, shares of Hilton have gained 12.8%, outperforming the industry 's increase of 2.5%.
Adjusted earnings per share came in at 55 cents, outpacing the consensus mark of 51 cents and improving 44.7% on year-over-year basis. Also, the bottom line came well ahead of the guided range of 43-47 cents. Nevertheless, total revenues of $2,074 million missed the consensus mark of $2,255.3 million but were up 9.4% from the year-ago quarter. The company's results were driven by rise in rate and occupancy as well as robust demand at the company's international hotels.
Hilton ended the first quarter with total 2,340 hotels containing roughly 355,000 rooms across the globe. The company also opened 75 hotels containing 10,600 rooms in the same quarter, resulting in a net unit growth of 7,100 rooms.
In fact, we believe that improving economic indicators have been a blessing for the hotel industry as these have perked up leisure and business travel demand. Under such circumstances, aggressive expansion strategies, industry-leading loyalty program coupled with an asset-light business model bode well for Hilton.
RevPAR and Adjusted EBITDA
In the quarter under review, system-wide comparable revenue per available room (RevPAR) increased 3.9% (on a currency-neutral basis) higher than the guided range of 1-3%. The improvement was driven by growth in occupancy and average daily rate (ADR). Strength at the company's international hotels mainly in Europe and Asia Pacific also contributed to the increase.
At comparable managed and franchised hotels RevPAR increased 3.8% in the quarter. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) came in at $455 million, up 9% year over year. Furthermore, solid RevPAR growth and efficient cost control positively impacted EBITDA growth.
Cash, Debt and Share Repurchase
As of Mar 31, 2018, cash and cash equivalents balance was $683 million, higher than $670 million at the end of Dec 31, 2017. Long-term debt was $6.7 billion. In the first quarter, the company repurchased 1.3 million shares of its common stock for roughly $110 million and an average price per share of $84.01.
Second-Quarter 2018 Outlook
For second-quarter 2018, adjusted earnings per share are anticipated to lie between 66 cents and 70 cents. The Zacks Consensus Estimate is pegged at 74 cents, which is likely to witness downward revision in the coming days. Hilton projects system-wide RevPAR to increase 3% to 4% year over year on a comparable as well as currency-neutral basis. Adjusted EBITDA is envisioned in the $530-$550 million band. Also, the company expects management and franchise fee revenues to improve in the band of 7-9% year over year.
Hilton Worldwide Holdings Inc. Price, Consensus and EPS Surprise
Hilton Worldwide Holdings Inc. Price, Consensus and EPS Surprise | Hilton Worldwide Holdings Inc. Quote
2018 View Upbeat
For 2018, adjusted earnings per share are projected between $2.62 cents and $2.71 cents, up from the prior estimate of $2.49-$2.60 cents. The Zacks Consensus Estimate is pegged at $2.65. System-wide RevPAR is anticipated to witness a year-over-year improvement of 2-4% on a comparable and currency-neutral basis compared with the earlier estimate of 1-3%. Meanwhile, adjusted EBITDA is expected in the $2,060-$2,100 million band, increasing at 8-10%.
Also, the company envisions management and franchise fee revenues to increase in the band of 9-11% year over year, up from the previous estimate of 8-10%. However, it continues to anticipate net unit growth of 6.5%.
Hilton has a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .
Red Rock Resorts, Inc. RRR has an Earnings ESP of +1.37% and a Zacks Rank #3. The company is likely to report first-quarter results on May 3.
Wingstop WING has an Earnings ESP of +5.66% and a Zacks Rank of 3. The company is slated to release first-quarter results on May 3, after market close.
Wendy's WEN has an Earnings ESP of +2.72% and a Zacks Rank #4. The company is scheduled to report first-quarter results on May 8, after market close.
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