February 13, 2019 / 11:28 AM / 9 months ago

Hilton's better-than-feared forecast drives shares higher amid trade worries

(Reuters) - Hilton Worldwide Holdings Inc on Wednesday provided a better-than-feared outlook for its key U.S. and China markets amid concerns around slowing global economic growth and trade wars, sending its shares up 7 percent.

FILE PHOTO: Hilton Worldwide Holdings Inc Chief Executive Christopher Nassetta (L) smiles as he poses with traders in bathrobes following the company's IPO on the floor of the New York Stock Exchange December 12, 2013. REUTERS/Brendan McDermid

The owner of Waldorf Astoria and Conrad hotel chains also expressed confidence that it could raise room rates in the United States, its biggest market, in 2019 when occupancy rates are already at record levels.

Hilton said it expects U.S. RevPAR - a key performance metric for the hotel industry - to grow in line with the company average of 1 to 3 percent in 2019, and China in excess of mid-single digits, albeit at a slower pace than 2018.

The company was seeing “broader economic growth that is still good in the United States and around the world,” Chief Executive Officer Christopher Nassetta said, adding that Hilton’s pipeline in China was in “good shape” and would continue to grow in 2019.

Hilton’s comments on China at a post-earnings call also drove shares of larger rival Marriott International Inc higher by more than 4 percent. Marriott has a bigger exposure to international markets, including China, than Hilton.

“Hilton sounded confident regarding China, which we believe was a concern for investors heading into today’s call,” J.P. Morgan analyst Joseph Greff said.

The company cut its overall 2019 outlook for growth in RevPAR to a range of 1 percent to 3 percent in 2019, from earlier forecast of an increase between 2 percent and 4 percent, but analysts said the lowered forecast was expected by investors amid geopolitical uncertainties.

“We believe the resetting of expectations sets an achievable hurdle and de-risks the stock for the near term,” Jefferies analyst David Katz wrote in a note to clients.

Hilton said RevPAR grew 2 percent in the quarter ended Dec. 31, primarily driven by increased average daily rate.

On an adjusted basis, Hilton earned 79 cents per share in the quarter, beating analysts’ estimates of 69 cents, according to IBES data from Refinitiv.

Revenue rose 10.6 percent to $2.29 billion, beating Wall Street estimates of $2.27 billion.

Hilton shares were last up 6.1 percent at $78.88. Up to Tuesday’s close, Hilton shares had fallen 9.2 percent in the past 12 months, compared with a 3.3 percent rise in S&P 500 index during the period.

For an interactive graphic on U.S. hotel metrics over past 12 years, click: tmsnrt.rs/2UWYIXy

Reporting by Rama Venkat and Ankit Ajmera in Bengaluru; Editing by Maju Samuel

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