Updated from 9:22 a.m. EST

Investors sold shares of

Hilton Hotels

(HLT) - Get Report

after the company reported a slightly lower fourth-quarter profit and reduced its earnings guidance for this year.

Hilton Monday said fourth-quarter profit was $65 million, or 16 cents a share, down 3% from $67 million, or 17 cents a shares, a year before. The latest quarter included a $3 million pre-tax loss on hotel sales, including the sale of two DoubleTree properties near Portland, Ore., a $5 million asset write-down and the impact of a new accounting rule related to the company's convertible debt.

Without those items, which is the way Wall Street tends to view the company, Hilton earned 18 cents a share, compared with adjusted earnings of 11 cents a share a year earlier. On average, Wall Street analysts expected EPS of 16 cents a share, according to Thomson First Call.

Revenue was $1.054 billion, up 7% from a year earlier, and slightly better than the $1.04 billion forecast by Wall Street.

The company's stock fell 32 cents, or 1.4%, to $22.38.

Hilton said business and group bookings increased, while strong leisure demand allowed the company to raise rates. This combination led to "strong" results in most of the company's major owned hotels. Bright spots included New York City, Boston, New Orleans, Atlanta and Phoenix. Chicago remained "comparatively soft," however.

"The momentum that built in our business starting in late 2003 continued throughout 2004 and culminated in a very strong fourth quarter for our company," said Stephen Bollenbach, chief executive of Hilton. "We ended a highly successful year by seeing a return to pricing power that enabled us to raise room rates at our big-city hotels and across our system ... Even more exciting, though, are the indications that we are still in the early stages of what we believe will be a period of long-term strength in our industry and for our company."

Revenue per available room, a key industry metric called revpar, rose 8.3% at comparable hotels.

Looking ahead, Hilton expects revpar at comparable hotels to increase 7.5% to 8.5% over the course of 2005, with about 75% of that gain coming from rising average daily rates. That's stronger than the company's previous forecast of a 5% to 7% gain in 2005 revpar. Total revenue will likely come in between $4.50 billion and $4.52 billion, better than the $4.30 billion analyst consensus.

Nevertheless, Hilton is lowering its expectations for full-year EPS to the "low" 70-cents range from the low-to-mid-70 -cents range. The new guidance includes a hit of about 6 cents a share resulting from new rules for Hilton's contingently convertible debt and other accounting changes.

Hilton is the first major hotel group to report for the quarter.

Starwood Hotels & Resorts

(HOT)

reports later this week.