Investors scooped up shares of
Friday after the company said it would do some heavy buying of the stock itself.
The company said late Thursday it would repurchase up to 50 million shares of common stock given favorable market conditions. Hilton also said it has repurchased 5.5 million shares so far this quarter as part of a previous repurchase plan.
In reaction, shares jumped 85 cents, or 3.9%, to $22.70, after hitting an intraday high of $22.85. Volume was 2.4 million shares, making it by far the most heavily traded large hotel stock Friday.
Analysts said the announcement took them by surprise and was a much-needed positive catalyst for the stock after a near-4.0% decline since the beginning of the year. Shares weren't helped in late January when the company reported lower fourth-quarter earnings and reduced full-year EPS guidance. That contrasted with industry leader
Starwood Hotels & Resorts'
bullish outlook and solid earnings growth.
"The large authorization and active buying in the first quarter should meaningfully boost investor confidence in management's desire to return its growing stockpile of free cash flow," wrote Marc Falcone of Deutsche Bank in a research note. The buybacks so far this quarter should add roughly 1 cent to 2 cents to the company's EPS, he estimated. (Deutsche Bank does and seeks to do business with companies covered in its research reports.)
Michael Rietbrock, an analyst at Citigroup Smith Barney, wrote in a research note that Hilton's move was "particularly noteworthy" given management's prior reluctance to make a specific commitment about returning capital to investors. (Citigroup does and seeks to do business with companies covered in its research reports.)