Yahoo Finance Here's Why You Should Retain Hilton (HLT) Stock For Now
Hilton Worldwide Holdings Inc. HLT will likely benefit from a rise in leisure demand, unit-expansion efforts and its loyalty program. However, supply chain challenges and inflationary pressures are headwinds.
Let us discuss the factors that highlight why investors should retain the stock for the time being.
Growth Catalysts
Shares of Hilton have gained 11.3% in the past six months compared with the industry’s 9% growth. The company benefited from a rise in leisure demand and a sequential improvement in RevPAR in corporate transient and group businesses. During the third quarter of 2022, system-wide comparable revenue per available room (RevPAR) increased 29.9% year over year (on a currency-neutral basis), owing to an increase in occupancy and average daily rate (ADR). Also, RevPAR was up 5% from 2019 levels. The upside was primarily backed by strong leisure transient trends and improving business activity. The company witnessed solid RevPAR gains in Europe, the Middle East and Africa region owing to strong leisure demand and international inbound travel throughout the summer season.
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Hilton anticipates system-wide 2022 RevPAR to increase between 40-43% (compared with the previous projection of 37-43%) on a year-over-year basis. Attributes such as pent-up demand, strong consumer spending and reopening of international borders are likely to add to the positives.
To maintain its position as the fastest-growing global hospitality company, Hilton is continuing to drive unit growth. During third-quarter 2022, Hilton opened 80 new hotels. It also achieved net unit growth of nearly 12,100 rooms. As of Sep 30, Hilton's development pipeline comprised nearly 2,810 hotels, with nearly 416,000 rooms across 112 countries and territories — including 29 countries and territories where it currently has no running hotels. Moreover, 242,600 rooms in the development pipeline were located outside the United States and 204,200 rooms were under construction. For 2022, the company expects net unit growth to be nearly 5%.
Hilton emphasizes on its luxury development strategy to drive growth. During the third quarter of 2022, the company boosted its luxury portfolio by opening Waldorf Astoria Kuwait. The company also announced nine new agreements to boost its luxury portfolio in the Asia Pacific region (including the Conrad, Singapore Orchard). Also, it emphasized the expansion of its luxury line-up with agreements in Malaysia, Waldorf and Morocco.
One of the largest loyalty programs, Hilton Honors, created a precious asset for the company. Innovations like the Hilton Honors app continue to drive the program’s growth. As of Sep 30, 2022, the loyalty program had more than 146 million members. With membership levels increasing 19% on a year-over-year basis (as of third-quarter 2022), the company continues to outline opportunities to engage its Honors members through enhanced partnerships and points redemption offerings. Hilton intends to focus on new opportunities to drive customer engagement to reach pre-pandemic levels.
Concerns
The coronavirus crisis has materially impacted the company’s operations during third-quarter 2022. During the quarter, strict COVID policies and lockdowns in Shanghai and Beijing put pressure on travel demand. Although most properties have lifted or eased restrictions, uncertainty related to pandemic-induced implications is a concern. In 2022, the company anticipated RevPAR to decline 1-3% from 2019 levels. It also remains cautious of supply chain challenges and inflationary pressures.
Zacks Rank & Key Picks
Hilton currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the Zacks Consumer Discretionary sector are Royal Caribbean Cruises Ltd. RCL, Reservoir Media, Inc. RSVR and World Wrestling Entertainment, Inc. WWE.
Royal Caribbean currently sports a Zacks Rank #1. RCL has a trailing four-quarter earnings surprise of negative 1.8%, on average. Shares of RCL have declined 34.1% in the past year.
The Zacks Consensus Estimate for RCL’s 2023 sales and earnings per share (EPS) indicates a rise of 43.6% and 138.3%, respectively, from the year-ago levels.
Reservoir currently sports a Zacks Rank #1. RSVR has a long-term earnings growth rate of 17.5%. Shares of RSVR have declined 19.3% in the past year.
The Zacks Consensus Estimate for RSVR’s 2023 sales and EPS indicates a rise of 11.6% and 80%, respectively, from the year-ago period’s levels.
World Wrestling Entertainment currently carries a Zacks Rank #2 (Buy). WWE has a trailing four-quarter earnings surprise of 25.2%, on average. The stock has increased 44% in the past year.
The Zacks Consensus Estimate for WWE’s current financial year sales and EPS indicates a rise of 4.9% and 10.7%, respectively, from the year-ago period’s estimated levels.
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Royal Caribbean Cruises Ltd. (RCL) : Free Stock Analysis Report
World Wrestling Entertainment, Inc. (WWE) : Free Stock Analysis Report
Hilton Worldwide Holdings Inc. (HLT) : Free Stock Analysis Report
Reservoir Media, Inc. (RSVR) : Free Stock Analysis Report
