Investors Should Hold on to Hilton Stock for Now: Here's Why

Company Performance and Growth - Hilton Worldwide Holdings Inc (HLT) has seen its shares gain 12.7% in the past six months, outperforming the Zacks Hotels and Motels industry, the Zacks Consumer Discretionary sector, and the S&P 500 [1] - The Zacks Consensus Estimate for the company's 2025 earnings per share (EPS) is $7.85, indicating 12.2% year-over-year growth, with first-quarter 2025 earnings estimates showing 7.8% year-over-year growth [3] - The company's earnings surpassed expectations in each of the trailing four quarters, with an average surprise of 5.8% [3] Demand and Revenue Trends - Hilton is benefiting from robust booking trends driven by strong demand for both corporate and social meetings and events, reflecting an increase in leisure and business travel demand [5] - In Q3 2024, the company's system-wide Revenue per Available Room (RevPAR) increased 1.4% year over year, with business transient RevPAR rising 2% [6] - Management forecasts a Q4 2024 system-wide RevPAR increase of 1-2% year over year, supported by robust group bookings and recovery in business transient travel [6] Global Expansion and Acquisitions - Hilton opened 531 new hotels in Q3 2024, achieving 7.8% net unit growth, with a development pipeline of nearly 3,525 hotels and 492,400 rooms across 120 countries and territories [7] - The company recently opened its 8,000th hotel globally and expanded to 900 hotels in Asia-Pacific and EMEA [8] - Hilton acquired the Graduate Hotels brand and a majority controlling interest in Sydell Group to expand its presence in the lifestyle and luxury hotel markets, with plans to develop up to 100 NoMad properties worldwide [9] Capital-Light Business Model - Hilton has transformed into a capital-light operating business, focusing on growing market share, units, and free cash flow per share while maintaining a strong balance sheet [10] - In Q3 2024, the company repurchased 3.3 million shares worth approximately $727 million and returned $2.4 billion to shareholders through buybacks and dividends through October [10] Challenges and Risks - RevPAR in China declined 9% year over year in Q3 2024 due to difficult domestic travel comparisons, typhoon disruptions, and limited international inbound travel [11] - Elevated inflation and interest rates pose challenges to Hilton's growth strategy, potentially delaying openings and new developments [12] - Consumer demand for services is sensitive to economic conditions, travel patterns, and discretionary spending levels, which could impact Hilton's revenues and profitability [13] Sector Comparison - Strategic Education, Inc (STRA) has a Zacks Rank 1, with a trailing four-quarter negative earnings surprise of 40.4% and a 5.6% stock gain in the past year [14] - Trip.com Group Limited (TCOM) has a Zacks Rank 1, with a trailing four-quarter earnings surprise of 42.8% and an 87.3% stock surge in the past year [15] - Universal Technical Institute, Inc (UTI) has a Zacks Rank 1, with a trailing four-quarter earnings surprise of 54.6% and an 88.8% stock hike in the past year [16]