Hilton Worldwide Hits 52-Week High on Solid Q3 Earnings - Analyst Blog

Shares of Hilton Worldwide Holdings Inc. (HLT) hit a new 52-week high of $26.16 on Nov 25. In fact, the company's share price has increased 3.6% since it posted strong third quarter results and increased its earnings guidance on Oct 31. Year-to-date, shares of this hotel company have gained 19.6%.

Though third quarter adjusted earnings of 18 cents declined year over year, it beat the Zacks Consensus Estimate of 17 cents by 5.9%. Also, it was above management's guidance of 15 cents to 17 cents per share. The upside reflects a year-over-year increase in revenues attributable to higher occupancy and room rates worldwide.

Revenues of $2.64 billion increased 8% year over year and beat the Zacks Consensus Estimate of $2.62 billion by 1%. The upside reflects increase in revenues in all the segments and solid RevPAR growth. In the third quarter, RevPAR for comparable system-wide properties grew 8.4%, driven by a 4.2% rise in average daily rate (ADR) and 3.1% rise in occupancy. The company's RevPAR growth in the quarter was higher than the guided range of 5.5% to 7%.

Given the encouraging results, the company increased its EBITDA and earnings guidance for 2014.  The company expects adjusted EPS in the range of 69 to 71 cents per share, up from the previous guidance of 67 cents and 70 cents and the year-ago earnings of 53 cents per share.

The company increased the lower end of its expectation for system-wide RevPAR in the range of 6% to 7% on a comparable and currency neutral basis, compared with the previous expectation of 5.5% to 7%. Adjusted EBITDA is projected to be between $2.47 billion and $2.49 billion, up from the prior range of $2.43 to $2.48 billion.

Also, earnings for the fourth quarter are expected in the range of 16 to 18 cents, up from the year-ago earnings of 11 cents per share.

Hilton has seen strong U.S. RevPAR growth so far in 2014. Hilton's geographic exposure in the U.S., as well as its improving group business trends are the major RevPAR drivers. Hilton is progressing well on the back of a growing North American business, steady international exposure and increasing market share. Internationally, Hilton has aggressively expanded in high-growth emerging markets like China. Despite the slowdown in the Chinese economy, we believe Asia Pacific will be able to boost revenues, primarily backed by higher tourism numbers.

Hilton Worldwide presently has a Zacks Rank #2 (Buy).

Other Stocks to Consider

Investors interested in the hotel industry may also consider stocks like Choice Hotels International Inc. (CHH), Intercontinental Hotels Group plc (IHG) and Marriott International, Inc. (MAR). All these stocks carry a Zacks Rank #2.