Hilton (HLT)

Hotel company Hilton (NYSE:HLT) beat Wall Street’s revenue expectations in Q3 CY2025, with sales up 8.8% year on year to $3.12 billion. Its non-GAAP profit of $2.11 per share was 3% above analysts’ consensus estimates.

Company Overview

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

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.

Hilton’s primary competitors include Marriott International (NASDAQ:MAR), InterContinental Hotels Group (NYSE:IHG), Hyatt Hotels (NYSE:H), Wyndham Hotels & Resorts (NYSE:WH), and Accor (EPA:AC).

Reviewing a company’s long-term sales performance reveals insights into its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last five years, Hilton grew its sales at a decent 15.2% compounded annual growth rate. Its growth was slightly above the average consumer discretionary company and shows its offerings resonate with customers.

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 trend. Hilton’s recent performance shows its demand has slowed as its annualized revenue growth of 8% over the last two years was below its five-year trend.

Hilton also reports revenue per available room, which clocked in at $115.16 this quarter and is a key metric accounting for daily rates and occupancy levels. Over the last two years, Hilton’s revenue per room was flat. 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 reported year-on-year revenue growth of 8.8%, and its $3.12 billion of revenue exceeded Wall Street’s estimates by 3.7%.

Looking ahead, sell-side analysts expect revenue to grow 6.9% over the next 12 months, similar to its two-year rate. This projection doesn't excite us and indicates its products and services will see some demand headwinds.

Hilton’s operating margin has risen over the last 12 months and averaged 21.4% over the last two years. On top of that, its profitability was top-notch for a consumer discretionary business, showing it’s an well-run company with an efficient cost structure.

In Q3, Hilton generated an operating margin profit margin of 24.9%, up 3.2 percentage points year on year. This increase was a welcome development and shows it was more efficient.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Hilton’s EPS grew at an astounding 45.6% compounded annual growth rate over the last five years, higher than its 15.2% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

In Q3, Hilton reported adjusted EPS of $2.11, up from $1.92 in the same quarter last year. This print beat analysts’ estimates by 3%. Over the next 12 months, Wall Street expects Hilton’s full-year EPS of $7.79 to grow 12.1%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because 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 17.4% over the last two years, quite impressive for a consumer discretionary business.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Although Hilton hasn’t been the highest-quality company lately, it found a few growth initiatives in the past that worked out wonderfully. Its five-year average ROIC was 25.2%, splendid for a consumer discretionary business.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Fortunately, Hilton’s ROIC has increased significantly over the last few years. This is a good sign, and if its returns keep rising, there’s a chance it could evolve into an investable business.

Hilton reported $1.06 billion of cash and $11.73 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $3.64 billion of EBITDA over the last 12 months, we view Hilton’s 2.9× net-debt-to-EBITDA ratio as safe. We also see its $612 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was encouraging to see Hilton beat analysts’ revenue expectations this quarter. We were also happy its EBITDA outperformed Wall Street’s estimates. Overall, this print had some key positives. The stock traded up 3.1% to $274.50 immediately after reporting.

Updated: December 4, 2025 at 9:54 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Hilton.

We see the value of companies helping consumers, but in the case of Hilton, we’re out. First off, its revenue growth was weak over the last five years, and analysts expect its demand to deteriorate over the next 12 months. And while its remarkable EPS growth over the last five years shows its profits are trickling down to shareholders, the downside is its Forecasted free cash flow margin suggests the company will ramp up its investments next year. On top of that, its revenue per room has disappointed.

Hilton’s P/E ratio based on the next 12 months is 31.6x. This valuation tells us it’s a bit of a market darling with a lot of good news priced in - we think other companies feature superior fundamentals at the moment.

Wall Street analysts have a consensus one-year price target of $283.72 on the company (compared to the current share price of $273.25).