TD Cowen has maintained its Buy rating on Hilton Worldwide (NYSE: HLT) but lowered the price target to $256 from the previous $265.
The adjustment follows Hilton's Revenue per Available Room (RevPAR) falling short of expectations, registering a 1.4% increase against the forecasted 2-3%.
The underperformance was attributed to a combination of factors including a challenging September calendar, adverse weather conditions in the US and Asia-Pacific regions, labor issues, and the ongoing impact of China's market conditions.
According to the firm's analyst, the outlook for the fourth quarter remains stable with an anticipated RevPAR growth of 1-2%, revised down from the previous 2-3% estimate.
The forecast takes into account the recovery from hurricane impacts, which is expected to be counterbalanced by the increasing headwinds from the upcoming elections.
Looking further ahead, the early projections for 2025 suggest a RevPAR increase of 2%. Despite the near-term challenges, the pipeline for Hilton remains robust, with year-to-date new starts surging by 21%. This momentum is projected to drive a rise in the organic growth of the company's unit count, accelerating to 6-7% in 2025, up from the roughly 5% expected in 2024.
In other recent news, Hilton Worldwide has been a focal point for several financial institutions. Mizuho Securities raised its price target for Hilton to $243, retaining an outperform rating, in light of a robust adjusted EBITDA of $904 million, surpassing market consensus and analyst's projections.
The hotel giant's net unit growth also exceeded expectations, showing a 7.8% year-over-year increase. Despite challenges in China's market, Hilton experienced strong demand in Europe and group bookings, contributing to a RevPAR increase of 7.3%.
Truist Securities also adjusted its financial outlook for Hilton, raising the price target to $220 while maintaining a Hold rating. This adjustment was based on a detailed analysis of Hilton's anticipated financial performance, with the firm updating its 2024 and 2025 adjusted EBITDA and EPS estimates. Deutsche Bank echoed a similar sentiment, increasing Hilton's price target to $200 and maintaining a Hold rating, while noting a deceleration in Hilton's RevPAR but highlighting the company's strong unit growth outlook.
Hilton's recent Third Quarter 2024 Earnings Conference Call revealed strong performance and an optimistic outlook. The company reported record hotel openings, significant milestones in its Hilton Honors program, and a system-wide RevPAR increase. Furthermore, Hilton executives expressed confidence in achieving the 2025 EBITDA target of $3.69 billion.
InvestingPro Insights
Hilton Worldwide's recent performance and future outlook can be further contextualized with real-time data from InvestingPro. Despite the lowered price target from TD Cowen, Hilton's stock is currently trading near its 52-week high, with a price that is 97.29% of its peak. This resilience is reflected in the company's impressive 56.51% total return over the past year.
InvestingPro data shows that Hilton maintains a robust gross profit margin of 76.04% for the last twelve months as of Q3 2024, underscoring the company's operational efficiency despite the challenges mentioned in the article. This aligns with one of the InvestingPro Tips, which highlights Hilton's "impressive gross profit margins."
However, investors should note that Hilton is trading at a high earnings multiple, with a P/E ratio of 51.2. This valuation metric, coupled with the InvestingPro Tip that "9 analysts have revised their earnings downwards for the upcoming period," suggests that the market may be pricing in high expectations for future growth, which could be challenging given the revised RevPAR projections.
For those seeking a more comprehensive analysis, InvestingPro offers 14 additional tips for Hilton Worldwide, providing deeper insights into the company's financial health and market position.
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