A month has gone by since the last earnings report for Hilton Worldwide Holdings Inc. (HLT Quick QuoteHLT - Free Report) . Shares have added about 5.4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Hilton Worldwide due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Hilton Q2 Earnings Surpass Estimates, Revenues Lag

Hilton reported second-quarter 2024 results, with earnings beating the Zacks Consensus Estimate but revenues missing the same.

Both the metrics increased year over year. The company's performance was backed by notable improvements in revenue per available room (RevPAR), attributed to higher occupancy rates and average daily rates (ADR). The company benefited from growth in all segments.

Q2 in Detail

Hilton reported adjusted earnings per share (EPS) of $1.91, beating the Zacks Consensus Estimate of $1.85. The reported value rose 17.2% from the year-ago quarter’s reported adjusted EPS of $1.63.

Quarterly total revenues of $2,951 million missed the consensus mark of $2,973 million. The top line increased 10.9% year over year.

In the quarter, franchise and licensing fees improved 11.5% to $689 million year over year. Our estimate for the metric was $701.8 million.

Base and other management fees rose 8.1% to $93 million, while incentive management fees were down 1.4% to $68 million year over year. Our model predicted management and incentive management fees to be at $128.4 million and $84.8 million, respectively.

Owned and leased hotels’ revenues moved down 1.2% year over year to $337 million compared with the year-ago quarter’s level. Our estimate for the metric was $402.6 million.

RevPAR and Adjusted EBITDA

In the quarter under review, system-wide comparable RevPAR grew 3.5% year over year (on a currency-neutral basis), owing to an increase in occupancy and ADR. Our model predicted the metric to rise 2.6% year over year in the quarter under review.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) in the second quarter were $917 million, up 13.1% year over year. Our estimated adjusted EBITDA was $896.1 million.

Balance Sheet

As of Jun 30, 2024, cash and cash equivalent was $731 million, down from $800 million reported in the prior quarter. As of the second quarter of 2024, Hilton reported long-term debt outstanding of $10.2 billion, down from $10.3 billion reported in the previous quarter, excluding deferred financing costs and discounts, with a weighted average interest rate of 4.81%.

In the quarter, Hilton repurchased 3.5 million shares of its common stock worth approximately $724 million.

Management declared a quarterly cash dividend of 15 cents per share. The dividend will be payable on Sep 27 to shareholders of record as of Aug 23, 2024.

Q3 & 2024 Outlook

For third-quarter 2024, Hilton anticipates net income in the range of $435-$448 million. Adjusted EBITDA is expected to be between $875 million and $890 million. It projects third-quarter EPS (adjusted for special items) to be between $1.80 and $1.85.

For third-quarter 2024, management forecasts system-wide RevPAR (on a currency-neutral basis) to increase in the 2-3% band on a year-over-year basis.

For 2024, the company estimates net income in the range of $1.53-$1.55 billion compared with the previous estimate of $1.58-$1.62 billion. Adjusted EBITDA is expected to be between $3.37 billion and $3.40 billion compared with the prior expectation of $3.37 billion and $3.42 billion. It suggests general and administrative expenses for 2024 in the range of $415-$430 million.

Hilton expects 2024 EPS (adjusted for special items) in the range of $6.93-$7.03 compared with the previous expectation of $6.89-$7.03. Full-year capital return is anticipated to be $3 billion.

Management anticipates 2024 system-wide RevPAR (on a currency-neutral basis) to increase 2-3% year over year, down from the prior estimate of 2-4% growth.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

VGM Scores

At this time, Hilton Worldwide has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Hilton Worldwide has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Hilton Worldwide is part of the Zacks Hotels and Motels industry. Over the past month, Hyatt Hotels (H Quick QuoteH - Free Report) , a stock from the same industry, has gained 10.5%. The company reported its results for the quarter ended June 2024 more than a month ago.

Hyatt Hotels reported revenues of $1.7 billion in the last reported quarter, representing a year-over-year change of -0.1%. EPS of $1.53 for the same period compares with $0.82 a year ago.

For the current quarter, Hyatt Hotels is expected to post earnings of $1.37 per share, indicating a change of +95.7% from the year-ago quarter. The Zacks Consensus Estimate has changed +36.8% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Hyatt Hotels. Also, the stock has a VGM Score of A.