Why Is Hilton (HLT) Up 4.5% Since the Last Earnings Report?

It has been about a month since the last earnings report for Hilton Worldwide Holdings Inc. HLT. Shares have added about 4.5% in that time frame, outperforming the market.

Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Hilton Tops Q3 Earnings & Revenues, Lifts '17 View

Hilton reported better-than-expected third-quarter 2017 results with both earnings and revenues surpassing the Zacks Consensus Estimate.

The company’s results take into account the effect of the spin-offs completed in January 2017.

Earnings and Revenue Discussion

Adjusted EPS of 56 cents per share surpassed the Zacks Consensus Estimate of 50 cents by 12%. Moreover, the bottom line soared 37% year over year primarily owing to higher revenues. Also, the same came above management’s guided range of 47 cents to 51 cents.

Total revenue of $2.35 billion rose 26.1% year over year and topped the Zacks Consensus Estimate of $2.27 billion by nearly 4%.

Inside the Headlines

In the third quarter, system-wide comparable revenue per available room (RevPAR) increased 1.3% on a currency neutral basis, driven by 0.5% growth in occupancy and 0.6% rise in average daily rate (ADR). Markedly, strength at the company’s international hotels drove the results. Management had projected system-wide RevPAR to be flat to up 2% on a comparable and currency-neutral basis for the quarter.

RevPAR at comparable managed and franchised hotels increased 1.1% in the quarter. Both occupancy rate and ADR witnessed a rise of 0.5% each.

Adjusted EBITDA was $524 million, up 11% year over year. Adjusted EBITDA margins came in at 56.9%, up 170 basis points year over year.

Fourth-Quarter 2017 Outlook

Share-based metrics in Hilton's outlook for fourth-quarter and full-year 2017 do not include the effect of potential share repurchases.

For the fourth quarter, earnings per share are forecasted between 41 cents and 45 cents.

Hilton projects system-wide RevPAR to witness a year-over-year increase of 1% to 3% on a comparable and currency-neutral basis. Meanwhile, adjusted EBITDA is anticipated in the range of $453-$473 million.

Also, the company expects management and franchise fee revenues to increase in the band of 8-10% year over year.

2017 View Lifted

Given solid third-quarter results, the company increased its full-year 2017 outlook.

For full-year 2017, Hilton now anticipates adjusted earnings in the band of $1.87 to $1.91 per share, up from the earlier guided range of $1.78–$1.85.

Additionally, the company increased its full-year 2017 EBITDA expectations and now projects the same to be in between $1,920 million and $1,940 million (earlier $1,880--$1,920 million).

In the meantime, the company continues to expect management and franchise fee revenues to increase between 8% and 10% in 2017.

System-wide RevPAR is still anticipated to be in the range of 1–3% on a comparable and currency-neutral basis.

2018 Guidance

Hilton expects system-wide RevPAR to witness a year-over-year increase of 1% to 3% on a comparable and currency-neutral basis in 2018.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month. There has been one revision higher for the current quarter. While looking back an additional 30 days, we can see even more upward momentum. There have been three moves higher compared to one lower two months ago.

VGM Scores

At this time, Hilton's stock has a poor Growth Score of F, however its Momentum is doing a bit better with a D. Following the exact same course, the stock was allocated also a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate investors will probably be better served looking elsewhere.

Outlook

While estimates have been trending upward for the stock, the magnitude of this revision has been net zero. The stock has a Zacks Rank #2 (Buy). We are expecting an above average return from the stock in the next few months.

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