Hilton Worldwide (HLT) Stock Slipping After Announcing Secondary Offering, Cramer Weighs In

NEW YORK (TheStreet) -- Shares of Hilton Worldwide Holdings  (HLT) fell 1.2% to $29.74 in early market trading Monday after the company announced its secondary offering of common stock this morning.

The hotel company added that certain selling stockholders affiliated with Blackstone Group (BX) have commenced a secondary offering of 90 million shares. The deal range was between $29.85 to $29.95 per share.

TheStreet's Jim Cramer, Portfolio Manager of the Action Alerts PLUS Charitable Trust Portfolio says, "This was a brilliant transaction for Blackstone, but I would prefer people buy Marriott International (MAR) or La Quinta (LQ)."

"On Friday I spoke to the CEO of La Quinta, Wayne Goldberg, on CNBC's Mad Money, and that company is smoking," Cramer added.

The underwriters will have a 30-day option to purchase 13.5 million additional shares of common stock from the selling stockholders. 

Hilton Worldwide is not offering any shares of common stock in the offering, and will not receive any proceeds from the sale.

Deutsche Bank Securities (DB), Bank of America/Merrill Lynch (BAC) and Citigroup (C) are serving as joint book-running managers for the offering.

McLean, VA-based Hilton Worldwide is a hospitality company operating 4,080 hotels, resorts and timeshare properties, consisting of 671,926 rooms in 90 countries and territories.

Separately, TheStreet Ratings team rates HILTON WORLDWIDE HOLDINGS as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

"We rate HILTON WORLDWIDE HOLDINGS (HLT) a HOLD. The primary factors that have impacted our rating are mixed, some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we find that the company's profit margins have been poor overall."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 7.4%. Since the same quarter one year prior, revenues slightly increased by 10.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • HILTON WORLDWIDE HOLDINGS has improved earnings per share by 25.0% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, HILTON WORLDWIDE HOLDINGS increased its bottom line by earning $0.68 versus $0.22 in the prior year. This year, the market expects an improvement in earnings ($0.82 versus $0.68).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Hotels, Restaurants & Leisure industry. The net income increased by 21.9% when compared to the same quarter one year prior, going from $123.00 million to $150.00 million.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 30.09% over the past year, a rise that has exceeded that of the S&P 500 Index. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
  • The gross profit margin for HILTON WORLDWIDE HOLDINGS is rather low; currently it is at 24.89%. Regardless of HLT's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 5.77% trails the industry average.
  • You can view the full analysis from the report here: HLT Ratings Report

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