Hilton Grand Vacations Inc. HGV is focusing on diversifying its product portfolio and expanding global market reach through accretive buyouts and partnerships. The adequate mix of product offerings and favorable pricing benefits the company by ensuring cost synergies and enhancing its business growth. Furthermore, a balanced capital allocation approach, prioritizing shareholder value, is aiding it.

This Florida-based company’s shares have gained 6.2% in the past three months underperforming the Zacks Consumer Discretionary sector while outperforming the Zacks Hotels and Motels industry and the S&P 500 Index. Notably, from the chart given below it can be observed that the median share price performance of HGV is better than its peers.

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The Zacks Consensus Estimate of the company’s 2025 earnings per share (EPS) has moved south to $3.55 from $3.63 in the past 60 days. However, the estimated value indicates 3.4% year-over-year growth. Its growth prospects are further solidified by a VGM Score of B, backed by Value and Momentum Scores of A. The positive trend signifies bullish analysts’ sentiments, robust fundamentals and the prospects of an outperformance in the near term.

Although Hilton Grand effectively ensures cost synergies and maintains operational efficiencies, the increasing cost and expense structure is somewhat marring its bottom line.

Let us discuss the factors why investors must retain this Zacks Rank #3 (Hold) stock for now.

HGV’s Growth Driving Factors

Incremental Buyouts & Partnerships: Hilton Grand engages in exploring new business opportunities for product diversification and in new or existing markets through accretive acquisitions and strategic collaborations. On Jan. 17, 2024, the company acquired the Bluegreen Vacations Holding Corporation for approximately $1.6 billion. This buyout intends to broaden HGV’s offerings, customer reach and sales locations, adding nearly 200 properties in 14 new regions and eight new states. Furthermore, on Dec. 1, 2023, the company acquired BRE Grand Islander Parent LLC for $117 million.

Apart from acquisitions, HGV’s partnerships with Bass Pro Shops and Great Wolf Lodge add notable value to its business enhancement initiatives. In November 2023, the company entered into a 10-year exclusive marketing agreement with Bass Pro to market and sell vacation packages at kiosks in Bass Pro’s and Cabela’s retail locations and through other means. As of Sept. 30, 2024, Hilton Grand had sales and marketing operations at 132 Bass Pro Shops and Cabela’s Stores, including nine virtual kiosks. Moreover, in the third quarter of 2024, the company opened four new retail outlets in Great Wolf locations and is expected to have opened four additional outlets by the end of 2024.

Rebranding Efforts: Hilton Grand is undergoing several rebranding initiatives to realize cost synergies and enhance its business portfolio. These efforts position the company to explore several opportunities and expand its growth momentum in the competitive industry. The company is currently undergoing a rebranding of many of the Diamond properties and expects to rebrand the majority of Bluegreen properties, which is expected to be done by 2026. In 2024, about 80% of Diamond properties were rebranded. The majority of the rebranded assets will operate under Hilton Vacation Club properties, with a handful of unique properties becoming part of the Hilton Grand Vacations brand.

The company is also optimistic about introducing HGV Max to the Bluegreen system, providing Bluegreen members access to the top-tier Hilton ecosystem. It believes that this revolutionary launch will attract new buyers and motivate existing owners to upgrade their memberships.

Rewarding Shareholders: Through a balanced capital allocation strategy, HGV has been ensuring shareholder value and investing free cash flow for business enhancement activities. The primary priorities include supporting business growth through reinvestment, returning cash to shareholders through share repurchases or dividends and exploring opportunities for high-ROI strategic mergers and acquisitions. During the first nine months of 2024, Hilton Grand repurchased 7.4 million shares for $307 million.

Furthermore, the company’s trailing 12-month return on equity (ROE) reflects its growth potential and focus on maintaining shareholder value. Its ROE of 16.4% compares favorably with the industry’s 5.4%, indicating more efficiency in using shareholders’ funds than peers.

What’s Hindering Hilton Grand’s Momentum?

The company has been witnessing high operating expenses due to increased expenses across sales and marketing, resort and club management, rental and ancillary services, and financing. Also, acquisition and integration-related expenses, mainly due to the Bluegreen Vacations acquisition, are headwinds. During the first nine months of 2024, HGV’s total operating expenses increased year over year to $3.37 billion from $2.50 billion.

Key Picks

Here are some better-ranked stocks from the same sector.

Norwegian Cruise Line Holdings Ltd. NCLH currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

NCLH has a trailing four-quarter earnings surprise of 4.2%, on average. The stock has gained 44.4% in the past year. The Zacks Consensus Estimate for NCLH’s 2025 sales and EPS indicates growth of 8.4% and 25%, respectively, from the year-ago levels.

Atour Lifestyle Holdings Limited ATAT presently sports a Zacks Rank of 1. ATAT has a trailing four-quarter earnings surprise of 5.4%, on average. The stock has increased 51.1% in the past year.

The Zacks Consensus Estimate for ATAT’s 2025 sales and EPS indicates an increase of 28.1% and 24.6%, respectively, from the year-ago levels.

Universal Technical Institute, Inc. UTI currently sports a Zacks Rank of 1. UTI has a trailing four-quarter earnings surprise of 54.6%, on average. The stock has surged 106% in the past year.

The Zacks Consensus Estimate for UTI’s fiscal 2025 sales and EPS indicates an increase of 10.1% and 28%, respectively, from the year-ago levels.

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