Hilton sees World Cup boost but shares fall on soft guidance

Hilton Worldwide Holdings Inc (NYSE:HLT) raised its full-year profit outlook on Tuesday, but shares fell 3.4% after third-quarter guidance came in below Wall Street estimates.

The hotel operator now expects full-year adjusted earnings per share of $8.89 to $9.01, up from $8.79 to $8.91 previously.

Full-year adjusted EBITDA is projected at $4.04 billion to $4.08 billion, above the prior range of $4.02 billion to $4.06 billion.

Full-year net income guidance was trimmed to $1.88 billion to $1.91 billion from $1.91 billion to $1.94 billion.

For the second quarter, Hilton posted adjusted earnings of $2.29 per share, topping estimates of $2.27, on adjusted EBITDA of $1.05 billion, ahead of the $1.04 billion expected.

But third-quarter guidance disappointed. Hilton forecast adjusted earnings of $2.28 to $2.34 per share, below the $2.42 analysts had projected, with adjusted EBITDA guided to $1.035 billion to $1.055 billion versus estimates of $1.08 billion.

Updated full-year guidance calls for system-wide comparable RevPAR growth of 3% to 3.5%, up from 2% to 3%. Net unit growth guidance held steady at 6% to 7%, with the second half of the year expected to outperform the first.

Management said third-quarter RevPAR growth of about 4% is expected on a constant currency basis, aided by the World Cup, while the fourth quarter faces a headwind from the US midterm elections.

Hilton's development pipeline grew 6% year-over-year to 541,300 rooms, up about 14,300 rooms from the prior quarter and well above the roughly 5,000-room pace a year earlier. Nearly half the pipeline is under construction, and more than half is located outside the US. The company opened 207 hotels during the quarter, adding 21,600 rooms net.

Capital returns for the year remain projected at approximately $3.5 billion.

Analysts at Jefferies said the results reflect continued strength in Hilton's business model, though the shifting calendar effects in the guidance should be roughly neutral for shares, given their 7.3% decline over the prior 40 days.