Why Hilton Grand Vacations Stock Tanked on Monday

An earnings release that featured declines in headline numbers, plus a pricey asset buy, led investors to sell out of travel stock Hilton Grand Vacations (HGV -0.16%). The company's share price took a more than 8% hit on Monday, a notably worse performance than the 0.2% gain of the S&P 500 index.

1.5 billion reasons to sell Hilton Grand Vacations

The more impactful of the two events was that asset buy, specifically Hilton Grand Vacations' deal to acquire peer company Bluegreen Vacations Holding (BVH). The total value of the purchase is roughly $1.5 billion, which includes debt assumption. The deal will be paid for entirely in cash.

That $1.5 billion is a big chunk of change. It also shakes out to $75 per Bluegreen share, which is more than double its Friday closing price.

Travel is a hot industry just now, and big assets are commanding a premium. Hilton Grand Vacations didn't detail how it would pay for the acquisition; as of the end of its third quarter, it had total cash and cash equivalents of $227 million.

Speaking of the third quarter, Hilton Grand Vacations' busy Monday saw the company release its results for the period. Total revenue was just under $1.02 billion, down from the nearly $1.12 billion in the same quarter of 2022. Adjusted net income also slumped, falling to $109 million ($0.98 per share) from the year-ago profit of $168 million.

A mixed quarter for the company

If Hilton Grand Vacations had posted a blowout quarter, investors might have been more willing to overlook the hefty price tag of the Bluegreen deal.

This wasn't the case, however. It beat only marginally on profitability, while whiffing on the top line. On average, analysts were expecting $0.96 per share for adjusted net income and $1.05 billion for revenue.

Compounding that, it also shaved its guidance for adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for full-year 2023. It now believes it will post $1 billion to $1.02 billion for that line item; previously, it was forecasting $1.09 billion to $1.12 billion.