Howard Hughes Holdings (HHH)

Real estate developer Howard Hughes Holdings (NYSE:HHH) reported revenue ahead of Wall Streets expectations in Q3 CY2025, with sales up 19.3% year on year to $390.2 million. Its GAAP profit of $2.02 per share was 32% above analysts’ consensus estimates.

Company Overview

Named after the eccentric business magnate and aviator whose legacy lives on in real estate development, Howard Hughes Holdings (NYSE:HHH) develops, owns, and manages master-planned communities and commercial properties across the United States.

Technology has been a double-edged sword in real estate services. On the one hand, internet listings are effective at disseminating information far and wide, casting a wide net for buyers and sellers to increase the chances of transactions. On the other hand, digitization in the real estate market could potentially disintermediate key players like agents who use information asymmetries to their advantage.

Howard Hughes Holdings competes with large-scale real estate developers and operators including Brookfield Properties (NYSE:BPY), Simon Property Group (NYSE:SPG), and Related Companies (private), as well as regional developers in its various markets.

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last five years, Howard Hughes Holdings grew its sales at a 17.6% compounded annual growth rate. Although this growth is acceptable on an absolute basis, it fell slightly short of our standards for the consumer discretionary sector, which enjoys a number of secular tailwinds.

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 product or trend. Howard Hughes Holdings’s annualized revenue growth of 27.4% over the last two years is above its five-year trend, but we were still disappointed by the results.

This quarter, Howard Hughes Holdings reported year-on-year revenue growth of 19.3%, and its $390.2 million of revenue exceeded Wall Street’s estimates by 15.7%.

Looking ahead, sell-side analysts expect revenue to grow 18% over the next 12 months, a deceleration versus the last two years. Still, this projection is commendable and implies the market is baking in success for its products and services.

Howard Hughes Holdings’s operating margin has shrunk over the last 12 months and averaged 33.3% over the last two years. The company’s profitability was mediocre for a consumer discretionary business and shows it couldn’t pass its higher operating expenses onto its customers.

In Q3, Howard Hughes Holdings generated an operating margin profit margin of 48.6%, down 12 percentage points year on year. This contraction shows it was less efficient because its expenses grew faster than its revenue.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Howard Hughes Holdings’s full-year EPS flipped from negative to positive over the last five years. This is encouraging and shows it’s at a critical moment in its life.

In Q3, Howard Hughes Holdings reported EPS of $2.02, up from $1.46 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. We also like to analyze expected EPS growth based on Wall Street analysts’ consensus projections, but there is insufficient data.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Howard Hughes Holdings has shown poor cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 7.4%, lousy 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? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Howard Hughes Holdings historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 4.1%, lower than the typical cost of capital (how much it costs to raise money) for consumer discretionary companies.

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. Over the last few years, Howard Hughes Holdings’s ROIC averaged 2.8 percentage point increases each year. This is a good sign, and we hope the company can continue improving.

Howard Hughes Holdings reported $1.97 billion of cash and $5.29 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 $723.3 million of EBITDA over the last 12 months, we view Howard Hughes Holdings’s 4.6× net-debt-to-EBITDA ratio as safe. We also see its $133.2 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 good to see Howard Hughes Holdings beat analysts’ EPS expectations this quarter. We were also excited its revenue outperformed Wall Street’s estimates by a wide margin. On the other hand, its revenue missed. Zooming out, we think this was a solid print. The stock remained flat at $79.72 immediately after reporting.

We think that the latest earnings result is only one piece of the bigger puzzle. If you’re deciding whether to own Howard Hughes Holdings, you should also grasp the company’s longer-term business quality and valuation.

We see the value of companies helping consumers, but in the case of Howard Hughes Holdings, we’re out. First off, its revenue growth was weak over the last five years, and analysts don’t see anything changing over the next 12 months. And while its spectacular EPS growth over the last five years shows its profits are trickling down to shareholders, the downside is its relatively low ROIC suggests management has struggled to find compelling investment opportunities. On top of that, its low free cash flow margins give it little breathing room.

Howard Hughes Holdings’s forward price-to-sales ratio is 2.2x. The market typically values companies like Howard Hughes Holdings based on their anticipated profits for the next 12 months, but there aren’t enough published estimates to arrive at a reliable number. You should avoid this stock for now - better opportunities lie elsewhere.

Wall Street analysts have a consensus one-year price target of $96.33 on the company (compared to the current share price of $79.72).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.