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Bear of the Day: Hilton Grand Vacations (HGV)

Hilton Grand Vacations Inc. HGV is a timeshare company exclusive to Hilton. This Zacks Rank #5 (Strong Sell) saw growth decelerate in the third quarter as the economy slowed.

Hilton Grand Vacations develops and operates a system of vacation ownership resorts in select vacation destinations. It has more than 525,000 Club members around the world.

Another Earnings Beat in Q3

On Nov 6, 2023, Hilton Grand Vacations reported its third quarter results. It beat on the Zacks Consensus Estimate, reporting $0.98 versus the consensus of $0.91.

It was the fifth earnings surprise in a row.

Total revenue declined to $1.018 billion from $1.116 billion in the third quarter of 2022.

Contract sales for the quarter, ending Sep 30, 2023, fell $18 million to $603 million compared to the year ago period. Tours increased by 14.8% and VPG decreased by 13.5% year-over-year.

Hilton Grand Vacations was also impacted by the Maui wildfires in the quarter.

Hilton Grand Vacations Updates Full Year Outlook

It started the quarter with a strong July, but growth decelerated as the quarter went along, particularly in August.

With a "modestly softer" consumer macroeconomic environment, the company updated its full-year outlook to reflect a more moderate improvement in contract sales for the remainder of the year.

As a result, the analysts cut earnings estimates for both 2023 and 2024.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

3 estimates were cut for 2023 in the last 30 days, pushing the Zacks Consensus down to $3.47 from $4.04 in the last 60 days. That's an earnings decline of 10.6% as Hilton Grand Vacations earned $3.88 last year.

4 estimates were also cut for 2024 with the Zacks Consensus falling to $3.71 from $4.38. However, that's earnings growth of 6.9%.

Shares Sink in the Last Year

The timeshare business is difficult in slowdowns and recessions. The Street appears to be getting a little nervous as shares of Hilton Grand Vacations are down 17.6% over the last year and are testing a key level of resistance.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

It's cheap, with a forward P/E of just 10.3.

It also is shareholder friendly. In the third quarter, it repurchased 1.5 million shares for $64 million. Hilton Grand Vacations still has $432 million remaining under the 2023 Share Repurchase Plan. It doesn't pay a dividend.

Investors interested in the timeshare industry might want to wait on the sidelines until the earnings estimates start trending up, instead of down.

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