Shares of Hilton Worldwide Holdings Inc. (NYSE: HLT) rose 7.5% on Wednesday after the company reported upbeat results for the second quarter of 2022 and raised its guidance for 2022.
It should be noted here that the company’s earnings and surprise sales in the quarter were 22.9% and 6.2%, respectively. The $36 billion resort and hotel company’s last closing price was $129.25 on Wednesday.
An overview of Hilton Worldwide’s second quarter results
During the quarter, the company’s adjusted earnings were $1.29 per share, above Street’s consensus estimate of $1.05 per share and the company’s guidance range of 0. $98 to $1.03 per share. Year-over-year, net income increased 130.4% on healthy sales growth, partially offset by a nearly 49% increase in total company expenses.
Revenues totaled $2.24 billion, which is above the consensus estimate of $2.11 billion. Revenue increased 68.5% over the prior year quarter, driven by a 54.4% increase in Management and Franchise segment sales and a 133.1% increase in Property segment.
At the end of the quarter, Hilton Worldwide had 6,983 properties, up from 6,892 in the first quarter, and approximately 1.1 million rooms compared to 1.08 million rooms in the prior quarter.
The company’s occupancy improved 1,230 basis points (bps) year over year to 70.8% in the quarter. The average daily rate during the quarter was $154.92, up 27.5% year over year. Additionally, revenue per available room (RevPAR) increased 54.3% to $109.62 during the quarter.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) was $679 million, up 69.8% year-on-year. Adjusted EBITDA margin in the quarter increased by 30 basis points to 69.1%.
Hilton Worldwide projections for the third quarter and 2022
The company expects adjusted earnings in the range of $1.16 to $1.24 per share in the third quarter. Adjusted EBITDA is expected to be in the range of $660-690 million.
For 2022, the company increased its earnings projection to $4.21-$4.46 per share from the previous guidance of $3.77-$4.02 per share. Adjusted EBITDA is now expected to be between $2,400 and $2,500 million for the year, above the previously reported $2,250 to $2,350 million range. RevPAR is expected to be 37% to 43%, compared to 32% to 38% in the prior year quarter.
During the year, the company expects to return $1.5 billion to $1.9 billion to shareholders, up from $1.4 billion to $1.8 billion previously forecast.
Capital Deployment by Hilton Worldwide
As of the end of the first half of 2022, the company’s cash and cash equivalents were $1,175 million, while it generated $528 million in cash flow from operating activities in during the period.
Of its cash resources, the company used $11 million for capital expenditures and $25 million to pay down debt. At the end of the first half, the company’s long-term debt stood at $8,702 million. Additionally, the company paid dividends totaling $41 million and repurchased 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. In addition, it still has to buy back shares worth $1.5 billion under its pre-approved programs.
Analysts are cautiously bullish on HLT stock
On TipRanks, analysts are cautiously optimistic about Hilton Worldwide’s outlook and have a moderate buy consensus rating based on three buys and eight takes. HLT’s average price target is $144.45, which suggests a 12.85% upside from the current level. Shares of Hilton Worldwide are down just 0.2% over the past year.
Following the company’s results, Robert W. Baird’s Michael Bellisario reiterated a Buy rating on HLT while raising the price target to $156 (20.7% upside potential) from $154.
Website Traffic Hints at HLT’s Upbeat Q2 Results
According to TipRanks, total estimated visits to the HLT website increased 39% year-over-year in the second quarter of 2022. Learn how website traffic can help you research your stocks favourites.
Rising traffic to the company’s website underpins HLT’s upbeat performance (especially its early results) in the second quarter.
Key Takeaways for HLT Investors
Demand for Hilton Worldwide’s services is high, as suggested by its second quarter 2022 occupancy and RevPAR, and increased projections for 2022. Additionally, the company’s efforts to address costs and high expenses should be beneficial in the coming quarters. . Rewarding its shareholders generously adds to HLT’s investment appeal.
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