Hilton Worldwide Holdings Inc. (NYSE:HLT)

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes exhibits significant volatility over the observed period. In 2019, the profit was strong at 1,213 million US dollars. However, in 2020, there was a drastic decline resulting in a negative value of -279 million US dollars, indicating operational challenges likely impacted by external factors. The figure partially recovered in 2021 to 614 million US dollars and saw a substantial increase in 2022, reaching 1,814 million US dollars. In 2023, the profit slightly decreased to 1,514 million US dollars but remained at a relatively high level compared to earlier years.

Cost of Capital

The cost of capital shows a gradual upwards trend throughout the years. Starting from 14.08% in 2019, it slightly decreased to 13.24% in 2020, before increasing steadily to 14.63% in 2021, 14.84% in 2022, and peaking at 15.14% in 2023. This rising trend suggests increasing risk or capital expense associated with the company's investments over time.

Invested Capital

Invested capital increased initially from 11,409 million US dollars in 2019 to 12,956 million US dollars in 2020, signifying growth in assets or capital deployment. Subsequently, there was a decline to 11,581 million in 2021, a further slight decrease to 11,342 million in 2022, and a continued downward trend to 10,493 million US dollars in 2023. This reduction in invested capital over the last three years could indicate divestments, asset sales, or strategic capital management to optimize the asset base.

Economic Profit

Economic profit reflects notable fluctuations and overall negative performance in most years. It was negative in 2019 (-394 million US dollars), which worsened significantly in 2020 reaching -1,994 million US dollars, paralleling the operational difficulties of that year. A rebound occurred in 2021 with a less negative figure of -1,081 million US dollars, followed by a positive economic profit of 131 million US dollars in 2022, suggesting value creation during this period. However, in 2023, economic profit declined back to a negative figure of -75 million US dollars, indicating that value generation was not sustained despite positive operational profit.

Net Income (Loss) Attributable to Hilton Stockholders

The net income exhibited considerable volatility during the observed period. In 2019, the company reported a positive net income of $881 million. However, in 2020, the net income turned negative, recording a loss of $715 million, indicative of significant financial challenges during that year. Subsequently, there was a recovery with net income returning to a positive value of $410 million in 2021. The upward trend continued strongly into 2022, with net income reaching $1,255 million, followed by a slight decrease to $1,141 million in 2023. Despite this recent decline, the net income remained substantially higher than pre-pandemic levels, reflecting an overall recovery and growth trajectory.

Net Operating Profit After Taxes (NOPAT)

The NOPAT followed a pattern similar to net income but demonstrated stronger growth in the latter years. Starting at $1,213 million in 2019, NOPAT decreased to a negative $279 million in 2020, illustrating operational challenges during that period. A recovery phase occurred in 2021 with NOPAT rising to $614 million. This positive trend accelerated markedly in 2022, where NOPAT increased significantly to $1,814 million, followed by a modest decline to $1,514 million in 2023. Despite the slight reduction, the NOPAT values for 2022 and 2023 were well above pre-pandemic levels, signaling improved operational efficiency and profitability post-2020.

Summary of Trends

Both net income and NOPAT experienced a sharp downturn in 2020, likely due to extraordinary external factors impacting financial performance. The subsequent years reveal a consistent recovery, with both metrics surpassing the levels observed in 2019 by a substantial margin in 2022 and 2023. The slight decreases observed in 2023 for both net income and NOPAT suggest a potential stabilization or minor pullback following robust growth. Overall, the company demonstrates resilience and an ability to return to, and exceed, prior profitability levels after a significant dip.

The financial data for the period from December 31, 2019, to December 31, 2023, exhibits notable fluctuations in the provision (benefit) for income taxes and cash operating taxes. The provision for income taxes, expressed in millions of US dollars, shows significant variability over the years. In 2019, the provision stood at a positive 358 million, indicating tax expense. However, in 2020, there was a marked reversal to a negative figure of -204 million, which suggests a tax benefit or credit during that year. This shift likely reflects the impact of extraordinary events or changes in profitability and tax strategy during the pandemic year. In the subsequent years, 2021 through 2023, the provision for income taxes rose steadily from 153 million to 541 million, indicating a return to tax expenses and an increasing tax burden over this period.

Conversely, cash operating taxes demonstrate a consistent upward trend throughout the five-year span. Starting at 474 million in 2019, cash taxes dropped sharply to 130 million in 2020, aligning with the overall decline in tax provision during that year. This decrease likely corresponds to reduced taxable income or enhanced tax reliefs during 2020. From 2021 onwards, cash operating taxes increased significantly each year—from 249 million in 2021, to 539 million in 2022, and reaching 911 million in 2023. The sharp increase in cash operating taxes in 2023 suggests a substantial rise in taxable income or changes in tax payment policies, possibly reflecting improved operational performance or changes in tax laws.

Provision for Income Taxes

2019: Positive tax expense noted at 358 million.

2020: Shift to a tax benefit of -204 million, indicating reduced tax burden or credits.

2021-2023: Progressive increase from 153 million to 541 million, signaling rising tax expenses.

Cash Operating Taxes

2019: Moderate cash tax payment of 474 million.

2020: Sharp decline to 130 million, reflecting reduced cash tax outflows amid challenging conditions.

2021-2023: Steady increase from 249 million to 911 million, highlighting growth in actual tax payments.

Overall, the data reveals that 2020 was an anomalous year with reduced tax liabilities, both on a reported and cash basis, likely influenced by external economic disruptions. Following this period, there was a clear recovery and escalation in both tax expenses provided for and taxes paid in cash, which points to improved profitability and potential normalization of tax obligations. The divergence between provision and cash taxes is less pronounced in later years, indicating closer alignment between accounting tax expense and cash tax outflow.

The financial data reveals several distinct trends regarding the company's debt, equity position, and invested capital over the five-year period.

Total Reported Debt & Leases

The total reported debt and leases consistently fluctuated within a range between approximately $9.1 billion and $11.6 billion. A notable increase occurred in 2020, rising sharply from $9.2 billion to $11.6 billion, likely reflecting elevated borrowing or leasing activities during that year. Subsequently, the debt level declined in 2021 and 2022 but increased again in 2023, settling slightly above $10 billion. This pattern suggests the company managed its leverage actively, possibly in response to external conditions impacting its financing needs.

Total Hilton Stockholders’ Deficit

The stockholders’ deficit exhibited significant volatility across the period, with all reported values remaining negative, indicating persistent equity shortfall. The deficit deepened markedly in 2020, deteriorating from -$482 million to -$1.49 billion, which may denote accumulated losses or increased liabilities. While some improvement occurred in 2021, the deficit worsened again in 2022 and reached its peak negative value of -$2.36 billion in 2023. This trend reflects ongoing challenges in achieving positive equity and may raise concerns about the company's capital structure and financial stability.

Invested Capital

Invested capital showed a rising trend from 2019 to 2020, increasing from $11.4 billion to almost $13 billion. After 2020, there was a steady decline over the next three years, with invested capital decreasing to approximately $10.5 billion by 2023. This decline might indicate asset disposals, reductions in capital expenditures, or changes in operational investments, potentially reflecting a strategic shift or responses to external market pressures.

In summary, the data suggests that the company experienced elevated leverage and equity deficits during the analyzed timeframe, especially around 2020 and onwards. Despite managing invested capital levels, ongoing equity challenges may impact financial flexibility and risk profile. Close monitoring and possible strategic adjustments to improve equity and manage debt levels could be necessary to enhance overall financial health.

Economic Profit

The economic profit exhibits significant volatility over the analyzed period. Initially, it shows a substantial negative value of -394 million US dollars in 2019, followed by a sharp decline to -1994 million in 2020, indicating a considerable reduction in economic profitability. In 2021, there is an improvement with the economic loss narrowing to -1081 million. The year 2022 marks a positive economic profit of 131 million, signaling a potential recovery or improved operational efficiency. However, this positive trend reverses slightly in 2023, with the economic profit returning to a negative value of -75 million.

Invested Capital

The invested capital fluctuates moderately throughout the period. It increases from 11,409 million US dollars in 2019 to a peak of 12,956 million in 2020, then declines steadily over the subsequent years, reaching 10,493 million by the end of 2023. This trend suggests a gradual reduction in the capital employed in the business following a temporary expansion in 2020.

Economic Spread Ratio

The economic spread ratio shows a consistently negative trend initially, indicating that the returns were below the cost of the invested capital. It is at -3.45% in 2019 and worsens significantly to -15.39% in 2020, reflecting a sharp decline in economic efficiency or profitability relative to the capital base. Improvements are noted in 2021, where the ratio rises to -9.33%, and more notably in 2022, turning positive at 1.16%, paralleling the shift to positive economic profit that year. However, the ratio falls back below zero to -0.71% in 2023, suggesting a slight deterioration in the return on invested capital relative to cost.

Economic Profit

The economic profit exhibited significant volatility over the five-year period. Starting with a negative value of -394 million US dollars in 2019, the figure deteriorated sharply in 2020 to -1994 million US dollars, likely reflecting adverse conditions during that year. In 2021, there was a partial recovery to -1081 million US dollars, followed by a shift to positive economic profit in 2022 at 131 million US dollars, indicating a period of improved profitability. However, in 2023, economic profit returned to negative territory at -75 million US dollars, suggesting renewed challenges or increased costs affecting overall economic value creation.

Adjusted Revenues

Adjusted revenues demonstrated a clear pattern of initial decline followed by recovery and growth. Revenues decreased markedly from 9,435 million US dollars in 2019 to 4,522 million US dollars in 2020, consistent with a year of significant revenue impact. Starting in 2021, revenues began to recover, reaching 5,660 million US dollars, followed by a strong rebound in 2022 with revenues of 8,946 million US dollars. This recovery continued into 2023, culminating in revenues of 10,450 million US dollars, surpassing the 2019 level and indicating a robust return to and growth beyond pre-decline revenue performance.

Economic Profit Margin

The economic profit margin tracked the economic profit trend, showing a substantial decline in 2020, dropping from -4.17% in 2019 to -44.1%. This indicates that the company’s ability to generate economic profit relative to revenue was deeply impaired during that year. Improvement ensued in 2021 with a margin of -19.09%, followed by a positive margin of 1.47% in 2022, demonstrating restored profitability efficiency. Despite this improvement, the margin slightly declined again in 2023 to -0.71%, suggesting marginal negative economic profitability relative to revenue that year.

Summary

The data reveals a period of significant disruption in 2020 with sharp declines in economic profit and revenues, likely linked to external market or industry-specific challenges. The subsequent years show a recovery trajectory with revenues exceeding 2019 levels by 2023, while economic profit and economic profit margin improved but remained volatile, exhibiting sensitivity to cost structure or profitability drivers. These observations indicate a company experiencing a recovery phase with fluctuating economic profitability despite consistent revenue growth in recent years.