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Hilton (HLT) Stock Up 12% in 3 Months: Will the Rally Last?

Hilton Worldwide Holdings Inc. HLT continues to benefit focusing on unit expansion, hotel conversions, strategic partnerships and loyalty programs. Consequently, the company’s shares have gained 11.9% in the past three months, compared with the industry’s increase of 8.5%.

This Zacks Rank #3 (Hold) company has an impressive long-term earnings growth rate of 44.5%. In the past 30 days, earnings estimates for 2022 and 2023 have been revised upward by 0.4% and 0.4% to $4.49 per share and $5.40 per share, respectively.

Let’s delve deeper.

Growth Drivers

In a bid 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. During the quarter, the company unveiled the Curio Collection, 600th Hilton Hotels & Resorts property of the brand.

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%.

The company is also benefiting from revenue per available room (RevPAR) improvement. During the third quarter of 2022, system-wide comparable RevPAR increased 29.9% year over year (on a currency-neutral basis), owing to an increase in occupancy and average daily rate. Also, RevPAR was up 5% from the 2019 levels.

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The uptick in RevPAR 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. 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.

Hilton has created one of the largest loyalty programs — Hilton Honors. With more than 115 million members, this network created an extremely valuable asset for the company. Meanwhile, innovations such as the Hilton Honors app continue to drive growth.

For 2022, the company anticipates net income in the range of $1,219-$1,240 million, up from the previous estimate of $1,146-$1,216 million. Adjusted EBITDA is expected to be between $2,500-$2,530 million, up from the previous estimate of $2,400-$2,500 million.

General and administrative expenses for 2022 are now expected in the range of $380-$400 million compared with the previous projection of $400 million and $420 million. The company expects 2022 diluted EPS (adjusted for special items) in the range of $4.46-$4.54, up from the prior estimate of $4.21-$4.46.

Key Picks

Some better-ranked stocks in the Consumer Discretionary sector are International Game Technology PLC IGT, Crocs, Inc. CROX and Boyd Gaming Corporation BYD.

International Game Technology currently sports a Zacks Rank #1 (Strong Buy). IGT has a trailing four-quarter earnings surprise of 115.8% on average. The stock has improved 13.8% in the past six months. You can see the complete list of today's Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for IGT’s current financial year’s sales and EPS indicates growth of 1.8% and 512.9%, respectively, from the year-ago period’s reported levels.

Crocs currently carries a Zacks Rank #2 (Buy). CROX has a long-term earnings growth rate of 15%. Shares of Crocs have declined 39.2% in the past year.

The Zacks Consensus Estimate for CROX’s 2022 sales and EPS indicates a rise of 51.5% and 23.7%, respectively, from the year-ago period’s reported levels.

Boyd Gaming carries a Zacks Rank #2. BYD has a long-term earnings growth rate of 12.8%. The stock has increased 2.2% in the past year.

The Zacks Consensus Estimate for BYD’s 2022 sales and EPS indicates growth of 4.4% and 11.9%, respectively, from the year-ago period’s reported levels.

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International Game Technology (IGT) : Free Stock Analysis Report

Boyd Gaming Corporation (BYD) : Free Stock Analysis Report

Crocs, Inc. (CROX) : Free Stock Analysis Report

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

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