Summary
- Hilton grew units more than 7%, contributing to 8% franchised and management revenue growth, 11% EBITDA growth and 21% earnings per share growth.
- Shares have appreciated 33% this year.
- Shares currently trade at 23 times consensus analyst estimates for 2019 earnings, a discount to the historical average, and below our estimate of the company's intrinsic value.
- The following segment was excerpted from this fund letter.
Hilton Worldwide Holdings
Hilton's (NYSE:HLT) most recent quarterly results continue to reinforce our view that the company's robust value proposition and asset-light, fee-based business model should allow it to compound earnings per share at a mid-to-high teens growth rate for years to come. This past quarter, Hilton grew units more than 7%, contributing to 8% franchised and management revenue growth, 11% EBITDA growth and 21% earnings per share growth (helped by a lower effective tax rate and fewer shares outstanding). Revenue per available room ("RevPAR") grew 1.4% this quarter, which outperformed the industry, as Hilton continues to gain share in a subdued market environment. Reflecting the asset-light nature of its business model, Hilton modestly increased its 2019 guidance for EBITDA and EPS growth despite lowering the high-end of its RevPAR growth (from +1-3% to +1-2%) due to modestly weakening conditions in the US and China.
