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Hilton (HLT) Stock on Fire: Outpaces Industry in The Past Year

·4-min read

Hilton Worldwide Holdings Inc. HLT is benefitting from focus on loyalty program, unit expansion and asset-light business model. Also, hotel conversions and luxury development strategies have been important factors for sales improvement over the last few quarters.

Shares of Hilton have surged 53.1% in the past year compared with the industry’s 38.4% growth. The price performance was backed by a solid earnings surprise history. Hilton’s earnings surpassed the Zacks Consensus Estimate in eight of the trailing 11 quarters. Earnings estimates for full-year 2021 and 2022 have moved up 9.4% and 4.2%, respectively, in the past 30 days. This positive trend signifies bullish analysts’ sentiments and justifies the company’s Zacks Rank #2 (Buy). This indicates robust fundamentals and expectation of outperformance in the near term. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Zacks Investment Research
Zacks Investment Research


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Major Growth Drivers

Emphasis on loyalty Program: One of the largest loyalty programs¬, Hilton Honors, has created an extremely valuable asset for the company. During first-quarter 2021, the company (in collaboration with American Express) launched two new co-branded credit cards in Japan to boost membership offerings through Hilton Honors bonus points. This marks the first of a kind offering to customers outside the United States. As of Mar 31, 2021, the loyalty program had more than 115 million members. Notably, innovations such as the Hilton Honors app continue to drive growth of the program.

Expansion Initiatives To Drive Growth: In a bid to maintain its position as the fastest-growing global hospitality company, Hilton continues to drive unit growth. During first-quarter 2021, the company opened 105 new hotels. Notably, the company reported net unit growth of 13,100 rooms, up 5.8% on a year-over-year basis. The openings include Virgin Hotel Las Vegas, Hilton Abu Dhabi Yas Island, Yucatan Resort Playa del Carmen and six properties along the California coast.

Focus on Luxury Development & Conversions: Moreover, Hilton continues to progress with its luxury development strategy. During first-quarter 2021, the company signed several deals to expand its portfolio of resorts. Notably, this includes expansion agreements of Waldorf Astoria and Canopy brands in Seychelles (with scheduled openings in 2023). Going forward, the company announced plans to launch LXR brand in Seychelles (with the opening of Mango House Seychelles) and Bali. Apart from this, the company is emphasizing on hotel-conversion opportunities to mitigate the impact of construction delays caused by the ongoing pandemic. To this end, the company opened Waldorf Astoria, Monarch Beach Resort and the Hilton Vancouver Downtown through hotel conversions.

Capital-Light Business Model: Hilton transformed into a capital-light operating business backed by the spin-offs of a portfolio of hotels and resorts as well as its timeshare business. Post spinoff, the company expects to be a resilient, fee-driven business with disciplined strategies. In fact, the focus is expected to be on growing market share, units, free cash flow per share as well as preserving the company’s strong balance sheet and accelerating return of capital. Furthermore, as Hilton’s unit growth is mostly financed by third parties, the company is capable of generating substantial returns on minimal capital investment.

Signs of Recovery in Global Markets: With restrictions being lifted and more than 97% of its properties operating, Hilton’s business is likely to pick up on improved demand post the summer period. The company is likely to benefit from gradual improvement in travel demand owing to accelerated vaccine distributions as well as ease in government restrictions. During fourth-quarter 2020 conference call, the company stated that it expects reopening of all systemwide rooms by second-quarter 2021. Rise in leisure demand coupled with rebound in corporate transient and group businesses are likely to benefit the company going forward.

Other Key Picks

Some other top-ranked stocks in the Zacks Consumer Discretionary sector include Marriott International, Inc. MAR, Clarus Corporation CLAR and Playa Hotels & Resorts N.V. PLYA. Marriott and Clarus sport a Zacks Rank #1, while Playa Hotels & Resorts carries a Zacks Rank #2.

2021 earnings for Marriott, Clarus and Playa Hotels & Resorts are expected to surge 1,188.9%, 37.7% and 81.4%, respectively.


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Marriott International, Inc. (MAR) : Free Stock Analysis Report

Hilton Worldwide Holdings Inc. (HLT) : Free Stock Analysis Report

Playa Hotels & Resorts N.V. (PLYA) : Free Stock Analysis Report

Clarus Corporation (CLAR) : Free Stock Analysis Report

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