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Mizuho Securities has adjusted its price target for Hilton Worldwide Holdings Inc. (NYSE: NYSE:HLT), reducing it to $237.00 from the previous $242.00, while retaining an Outperform rating on the hospitality company's shares.
The adjustment follows Hilton's second-quarter financial performance, which revealed an Adjusted EBITDA of $917 million.
The figure surpasses both Mizuho's projection of $901 million and Hilton's own guidance, which ranged between $890 million and $910 million.
Hilton's Net Unit Growth (NUG) matched expectations, reporting a 6.1% year-over-year increase, which aligns with Mizuho's forecast and is just slightly under the general market prediction of 6.2%.
The growth was attributed to new acquisitions and partnerships, specifically mentioning the additions of Small Luxury Hotels (SLH) and Graduate Hotels, alongside robust organic expansion.
However, Hilton has revised its full-year revenue per available room (RevPAR) guidance, narrowing it from a 2-4% increase to 2-3%. Additionally, the company has adjusted its full-year Adjusted EBITDA guidance, reducing the upper end of its range by $25 million, with a $10 million reduction at the midpoint.
These changes are primarily due to several factors impacting the business, including foreign exchange rates, softer demand in the U.S. market during the third quarter, particularly in the leisure and lower-end segments, and a weaker performance in China.
Hilton reported a strong second-quarter performance, exceeding market expectations with notable growth in Revenue per Available Room (RevPAR). The company's portfolio expanded beyond 8,000 hotels, and Hilton is projecting full-year net unit growth of 7% to 7.5%.
This growth has been fueled by strategic acquisitions and partnerships, as well as strong performance in the Europe, Middle East, Africa (EMEA), and Asia Pacific (APAC) regions.
Hilton's adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) and Earnings Per Share (EPS) surpassed expectations due to robust RevPAR growth. The company signed 63,000 rooms, boosting its pipeline to approximately 508,000 rooms, showing particular strength in the EMEA and APAC regions.
Despite a softer macro environment, Hilton maintains a positive outlook, expecting around 10% EBITDA growth for the full year. The company anticipates RevPAR growth in the third and fourth quarters to be around 2-3%, with business travel and group bookings as key drivers.
InvestingPro Insights
Following Mizuho Securities' updated outlook on Hilton Worldwide Holdings Inc. (NYSE:HLT), insights from InvestingPro show a nuanced financial landscape for the hospitality giant. Hilton is actively enhancing shareholder value, as evidenced by aggressive share buybacks, a strategy that can often signal management's confidence in the company's prospects. Furthermore, InvestingPro highlights Hilton's impressive gross profit margins, which stood at a robust 75.38% over the last twelve months as of Q2 2024. This financial health indicator is crucial for investors gauging the company's ability to convert sales into profit.
However, investors should note that Hilton trades at a high earnings multiple with a P/E ratio of 44.12, suggesting a premium market valuation that expects continued growth. The company's stock is characterized by low price volatility, which might appeal to investors seeking stability in their portfolio. It's also worth mentioning that Hilton has been profitable over the last twelve months and analysts predict profitability will continue this year, further solidifying its financial standing. For those seeking additional insights, there are over 13 InvestingPro Tips available, offering a deeper dive into the company's financial nuances and future outlook.
InvestingPro Data also reveals a market capitalization of $50.15 billion USD and a forward-looking PEG ratio of 44.97, which could be of interest to investors assessing growth potential relative to earnings. With revenue growth of 10.34% over the last twelve months as of Q2 2024, Hilton is showing a positive trajectory in its financial performance. For a comprehensive understanding of Hilton's financial health and strategic positioning, investors can explore further on https://www.investing.com/pro/HLT.
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