Shares of Hilton Worldwide (NYSE: HLT) fell 1.56% on Thursday after disappointing first quarter results.

The company operates more than 4,000 hotels, timeshares and resorts around the world. Of course, given the continued pandemic disruption in the hospitality industry, especially internationally, analysts’ expectations were rather low. Despite this, earnings of $ 0.02 per share missed the consensus estimate of $ 0.05 per share.

Revenue was $ 874 million, down 54% from the previous year quarter, when Covid restrictions and reluctance to travel began to have an impact. The revenue for the first quarter of 2020 was already down 13% compared to the same quarter in 2019.

The hospitality industry, like many others, uses specific metrics to track its activity. In the case of Hilton, the revenue per available room, known as RevPAR, declined by about 38% to $ 46.23.

Industry analysts still believe overall hotel activity will rebound later this year, driven primarily by leisure travel. This is good news and bad news for a company like Hilton, as well as for the Marriott International hotel chain (NASDAQ: MAR) which historically relied on business travelers as their primary source of income.

Hilton attributed the disappointing quarter to an increase in Covid cases around the world, leading to travel restrictions in parts of Asia and Europe. The company said it temporarily closed 275 locations during the quarter, primarily in Europe and the United States. Nonetheless, this was an improvement over 730 properties whose operations were suspended a year ago.

Expect a positive dynamic

In Hilton’s earnings report, CEO Christopher Nassetta said, “We are pleased with our first quarter results. As increasing Covid-19 cases and tighter travel restrictions, particularly in Europe and our Asia-Pacific region, weighed on demand in January and February, we saw significant improvement in March and April. . We expect this positive momentum to continue as vaccines are more widely distributed and our customers once again feel safe when they travel.

Analysts expect hotels to rebound strongly in the second half of this year, but remain cautious about how quickly business travel demand would increase, on which big chains, including Hilton and rival Marriott, matter a lot.

On a more pessimistic note, some analysts believe slower vaccination rates in the United States and China could mean a slower return to normal – or whatever passes for normal in the future.

Hilton isn’t alone among travel companies stumbling into a patchy and uncertain recovery.

Marriott Vacations Worldwide (NYSE: VAC), which operates timeshare properties, reported a quarterly loss of $ 0.49 per share on Wednesday, beating analysts’ estimates of a loss of $ 0.29 per share.

Dividends and redemptions remain suspended

Hilton suspended dividends and share buybacks in March 2020. In the earnings call, Nassetta said the company would likely wait for a more solid recovery, when it can generate positive free cash flow before restoring redemptions and dividends.

“We will be talking to our board of directors in the second half of the year as the recovery takes shape. And we would say it’s very likely that from next year we would come back to the ROI business, ”he said.

Shares ended Thursday’s session at $ 120.71, down 1.92. It was 3.7% below the stock’s 50-day moving average. The volume of trade was higher than in Wednesday’s session.

Despite being battered by the pandemic, shares of Hilton are still up 70.92% year-on-year and 10.21% year-to-date. As for earnings growth that could cause prices to appreciate further over time, analysts expect earnings of $ 1.92 per share this year, up from $ 0.10 in 2020. For the Next year, that number is expected to double again, to $ 3.99 per share.

Analysts are confident about the rebound. Morgan Stanley raised his price target from $ 101 to $ 110 on Thursday and Raymond James raised his target from $ 125 to $ 135.
Hilton slips Thursday after missing earnings estimates

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