Shares of Hilton Worldwide Holdings Inc. (New York Stock Exchange: HLT) rose 7.5% on Wednesday after the company delivered a positive second quarter of 2022 and raised its forecast for 2022.
It’s worth noting here that the company’s revenue and sales surprises for the quarter were 22.9% and 6.2%, respectively. The final closing price for his $36 billion resort and hotel company was $129.25 on Wednesday.
A Snapshot of Hilton Worldwide’s Second Quarter Results
The company’s adjusted earnings for the quarter were $1.29 per share, beating 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, revenue increased 130.4% on the back of healthy sales growth, partially offset by a nearly 49% increase in the company’s total expenses.
Total revenue was $2.24 billion, beating consensus expectations of $2.11 billion. His top line increased 68.5% from the same period last year. This was driven by a 54.4% increase in sales in the management and franchise segment and a 133.1% surge in revenue in the ownership segment.
At the end of the first 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 in the prior quarter.
The company’s utilization rate for the quarter improved 1,230 basis points (bps) year-on-year to 70.8%. The average daily rate for the quarter was $154.92, up 27.5% year over year. Revenue per available room (RevPAR) also increased 54.3% in the quarter to $109.62.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were $679 million, up 69.8% year-over-year. Adjusted for the quarter, his EBITDA margin increased 30 bps to 69.1%.
Hilton Worldwide Third Quarter and 2022 Forecast
The company expects third-quarter adjusted earnings of $1.16 to $1.24 per share. His EBITDA, adjusted, is projected to be in the range of $660 million to $690 million.
For 2022, the company has raised its earnings forecast to $4.21 to $4.46 per share, up from its previous forecast of $3.77 to $4.02 per share. Adjusted EBITDA is now projected to be $2,400 to $2,500 million for the year, putting him above the $2,250 to $2,350 million range. RevPAR is expected to be 37% to 43%, up from 32% to 38% in the year-ago quarter.
The company expects to return $1.5 billion to $1.9 billion to shareholders this year, up from its previous forecast of $1.4 billion to $1.8 billion.
Capital Allocation by Hilton Worldwide
The company had $1.175 billion in cash and cash equivalents at the end of the first half of 2022, but generated $528 million in cash flow from operations during that period.
From its cash resources, the company used $11 million for capital expenditures and $25 million for debt repayment. At the end of the first half, the company’s long-term debt was $8.702 billion. The company also paid him a total dividend of $41 million in the first half of 2022 and bought back $586 million worth of stock.
In September 2022, the company will pay shareholders a quarterly dividend of $0.15 per share. He also has $1.5 billion worth of shares left to buy back under the pre-approval program.
Analysts cautiously optimistic on HLT shares
At TipRanks, analysts are cautiously optimistic about Hilton Worldwide’s outlook, with a medium buy consensus rating based on 3 purchases and 8 holds. HLT’s average price target is $144.45 and from current levels he suggests a 12.85% rise. Shares of Hilton Worldwide have fallen just 0.2% over the past year.
Following the company’s performance, Robert W. Baird’s Michael Bellisario reiterated his buy rating for HLT, raising the price target from $154 to $156 (20.7% upside potential).
Website traffic inspired by HLT’s strong Q2 results
In the second quarter of 2022, estimated visits to HLT’s website increased 39% year-over-year, according to TipRanks.
The company’s website traffic growth underpins HLT’s strong performance in the second quarter, especially top-line results.
Key Takeaways for HLT Investors
Demand for Hilton Worldwide’s services is strong, as indicated by increased occupancy and RevPAR in Q2 2022 and forecasts for 2022. By rewarding shareholders generously, HLT becomes more attractive to invest in.
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