Timeshare vacation company Hilton Grand Vacations (NYSE:HGV) reported Q4 CY2024 results beating Wall Street’s revenue expectations, with sales up 26% year on year to $1.28 billion. Its non-GAAP profit of $0.49 per share was 33% below analysts’ consensus estimates.
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Hilton Grand Vacations (HGV) Q4 CY2024 Highlights:
- Revenue: $1.28 billion vs analyst estimates of $1.27 billion (26% year-on-year growth, 0.9% beat)
- Adjusted EPS: $0.49 vs analyst expectations of $0.73 (33% miss)
- Adjusted EBITDA: $240 million vs analyst estimates of $273.2 million (18.7% margin, 12.2% miss)
- Operating Margin: 38.2%, up from 14.6% in the same quarter last year
- Free Cash Flow Margin: 3.7%, down from 25% in the same quarter last year
- Members: 724,000, up 195,211 year on year
- Market Capitalization: $3.99 billion
“We’re excited to report a strong finish to another productive year, highlighted by the successful closing and integration of our Bluegreen Vacations acquisition,” said Mark Wang, CEO of Hilton Grand Vacations.
Company Overview
Spun off from Hilton Worldwide in 2017, Hilton Grand Vacations (NYSE:HGV) is a global timeshare company that provides travel experiences for its customers through its timeshare resorts and club membership programs.
Travel and Vacation Providers
Airlines, hotels, resorts, and cruise line companies often sell experiences rather than tangible products, and in the last decade-plus, consumers have slowly shifted from buying "things" (wasteful) to buying "experiences" (memorable). In addition, the internet has introduced new ways of approaching leisure and lodging such as booking homes and longer-term accommodations. Traditional airlines, hotel, resorts, and cruise line companies must innovate to stay relevant in a market rife with innovation.
Sales Growth
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, Hilton Grand Vacations grew its sales at an impressive 21.4% compounded annual growth rate. Its growth beat the average consumer discretionary company and shows its offerings resonate with customers.
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 property or trend. Hilton Grand Vacations’s recent history shows its demand slowed significantly as its annualized revenue growth of 14% over the last two years is well below its five-year trend. 
Hilton Grand Vacations also discloses its number of members and conducted tours, which clocked in at 724,000 and 206,865 in the latest quarter. Over the last two years, Hilton Grand Vacations’s members averaged 20.1% year-on-year growth while its conducted tours averaged 27.9% year-on-year growth. 
This quarter, Hilton Grand Vacations reported robust year-on-year revenue growth of 26%, and its $1.28 billion of revenue topped Wall Street estimates by 0.9%.
Looking ahead, sell-side analysts expect revenue to grow 6.3% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and implies its products and services will face some demand challenges.
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Cash Is King
Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.
Hilton Grand Vacations has shown weak cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 6%, subpar for a consumer discretionary business. The divergence from its good operating margin stems from its capital-intensive business model, which requires Hilton Grand Vacations to make large cash investments in working capital and capital expenditures.
Hilton Grand Vacations’s free cash flow clocked in at $48 million in Q4, equivalent to a 3.7% margin. The company’s cash profitability regressed as it was 21.3 percentage points lower than in the same quarter last year, prompting us to pay closer attention. Short-term fluctuations typically aren’t a big deal because investment needs can be seasonal, but we’ll be watching to see if the trend extrapolates into future quarters.
Key Takeaways from Hilton Grand Vacations’s Q4 Results
It was good to see Hilton Grand Vacations narrowly top analysts’ revenue expectations this quarter. On the other hand, its EPS and EBITDA missed. Overall, this was a softer quarter. The stock remained flat at $40.85 immediately following the results.
Is Hilton Grand Vacations an attractive investment opportunity right now? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.