Hilton Earnings: Demand Moderates but Still Expands; Shares Overvalued

Wide-moat Hilton’s third-quarter revenue per available room growth of 1.4% missed the hotelier’s target of 2%-3%, and the firm lowered its 2024 revPAR growth guidance to 2%-2.5% from 2%-3%. It appears revPAR was affected by an unexpected slower macroenvironment and adverse weather. Still, we don’t plan to adjust our 2.5% 2024 revPAR growth forecast, as we see signs of demand health in Hilton’s business that we believe will allow it to match our 2.5% increase modeled for wide-moat peer InterContinental. We don’t plan to change our $180 fair value estimate materially. But trading at 18 times forward enterprise value/EBITDA, versus about 14 times before the pandemic, the shares of this leading hotel brand appear overvalued to us.