Hotel company Hilton (NYSE:HLT) fell short of the market’s revenue expectations in Q3 CY2024, but sales rose 7.3% year on year to $2.87 billion. Its non-GAAP profit of $1.92 per share was 4.3% above analysts’ consensus estimates.

Is now the time to buy Hilton? Find out by accessing our full research report, it’s free.

Christopher J. Nassetta, President & Chief Executive Officer of Hilton, said, "We were pleased to deliver continued strong bottom line results that exceeded our guidance, despite slower top line growth which was driven by modestly slower macro trends, weather impacts and unfavorable calendar shifts. We continued to demonstrate the strength of our model, opening more rooms than any other quarter in our history, surpassing 8,000 hotels and achieving net unit growth of 7.8 percent. "

Company Overview

Founded in 1919, Hilton Worldwide (NYSE:HLT) is a global hospitality company with a portfolio of hotel brands.

Travel and Vacation Providers

Airlines, hotels, resorts, and cruise line companies often sell experiences rather than tangible products, and in the last decade-plus, consumers have slowly shifted from buying "things" (wasteful) to buying "experiences" (memorable). In addition, the internet has introduced new ways of approaching leisure and lodging such as booking homes and longer-term accommodations. Traditional airlines, hotel, resorts, and cruise line companies must innovate to stay relevant in a market rife with innovation.

Sales Growth

A company’s long-term performance can give signals about its business quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Unfortunately, Hilton’s 3.3% annualized revenue growth over the last five years was sluggish. This shows it failed to expand in any major way and is a rough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new property or emerging trend. Hilton’s annualized revenue growth of 16.1% over the last two years is above its five-year trend, suggesting some bright spots.

Hilton also reports revenue per available room, which clocked in at $121.40 this quarter and is a key metric accounting for daily rates and occupancy levels. Over the last two years, Hilton’s revenue per room averaged 9.3% year-on-year growth. Because this number is lower than its revenue growth, we can see its sales from other areas like restaurants, bars, and amenities outperformed its room bookings.

This quarter, Hilton’s revenue grew 7.3% year on year to $2.87 billion, missing Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 8.8% over the next 12 months, a deceleration versus the last two years. This projection doesn't excite us and shows the market thinks its products and services will face some demand challenges.

Here at StockStory, we certainly understand the potential of thematic investing. Diverse winners from Microsoft (MSFT) to Alphabet (GOOG), Coca-Cola (KO) to Monster Beverage (MNST) could all have been identified as promising growth stories with a megatrend driving the growth. So, in that spirit, we’ve identified a relatively under-the-radar profitable growth stock benefitting from the rise of AI, available to you FREE via this link.

Cash Is King

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Hilton has shown robust cash profitability, giving it an edge over its competitors and the ability to reinvest or return capital to investors. The company’s free cash flow margin averaged 16.4% over the last two years, quite impressive for a consumer discretionary business.

Key Takeaways from Hilton’s Q3 Results

It was encouraging to see Hilton slightly top analysts’ EPS expectations this quarter. On the other hand, its revenue unfortunately missed and its EBITDA guidance for next quarter fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 3.1% to $230.55 immediately following the results.

Should you buy the stock or not?What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock.We cover that in our actionable full research report which you can read here, it’s free.