Stock Analysis

Hilton Worldwide Holdings' (NYSE:HLT) Solid Earnings Have Been Accounted For Conservatively

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Hilton Worldwide Holdings Inc.'s (NYSE:HLT) solid earnings announcement recently didn't do much to the stock price. We did some analysis to find out why and believe that investors might be missing some encouraging factors contained in the earnings.

Check out our latest analysis for Hilton Worldwide Holdings

NYSE:HLT Earnings and Revenue History November 3rd 2021

The Impact Of Unusual Items On Profit

For anyone who wants to understand Hilton Worldwide Holdings' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by US$427m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's hardly a surprise given these line items are considered unusual. Hilton Worldwide Holdings took a rather significant hit from unusual items in the year to September 2021. All else being equal, this would likely have the effect of making the statutory profit look worse than its underlying earnings power.

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

An Unusual Tax Situation

Just as we noted the unusual items, we must inform you that Hilton Worldwide Holdings received a tax benefit which contributed US$60m to the bottom line. It's always a bit noteworthy when a company is paid by the tax man, rather than paying the tax man. Of course, prima facie it's great to receive a tax benefit. And given that it lost money last year, it seems possible that the benefit is evidence that it now expects to find value in its past tax losses. However, the devil in the detail is that these kind of benefits only impact in the year they are booked, and are often one-off in nature. Assuming the tax benefit is not repeated every year, we could see its profitability drop noticeably, all else being equal. So while we think it's great to receive a tax benefit, it does tend to imply an increased risk that the statutory profit overstates the sustainable earnings power of the business.

Our Take On Hilton Worldwide Holdings' Profit Performance

In its last report Hilton Worldwide Holdings received a tax benefit which might make its profit look better than it really is on a underlying level. But on the other hand, it also saw an unusual item depress its profit. Considering all the aforementioned, we'd venture that Hilton Worldwide Holdings' profit result is a pretty good guide to its true profitability, albeit a bit on the conservative side. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Every company has risks, and we've spotted 3 warning signs for Hilton Worldwide Holdings (of which 1 makes us a bit uncomfortable!) you should know about.

Our examination of Hilton Worldwide Holdings has focussed on certain factors that can make its earnings look better than they are. But there is always more to discover if you are capable of focussing your mind on minutiae. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying.

What are the risks and opportunities for Hilton Worldwide Holdings?

Hilton Worldwide Holdings Inc., a hospitality company, owns, leases, manages, develops, and franchises hotels and resorts.

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  • Trading at 11.2% below our estimate of its fair value

  • Earnings are forecast to grow 14.55% per year

  • Earnings grew by 2653.8% over the past year


  • Debt is not well covered by operating cash flow

  • Negative shareholders equity

  • Significant insider selling over the past 3 months

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