Will RevPAR Growth Drive Hilton's (HLT) Earnings in Q4?
Hilton Worldwide Holdings Inc. HLT is scheduled to report fourth-quarter and full-year 2015 results before the opening bell on Feb 26. Last quarter, the company posted in-line results.
Let’s see how things are shaping up for this announcement.
Factors at Play
Hilton saw strong U.S. revenue per available room (RevPAR) in 2015 and the trend is expected to continue in the to-be-reported quarter. Further, the company’s geographic exposure in the country, solid transient business as well as its improving group business trends will continue to be major RevPAR drivers. However, RevPAR in the EMEA region is expected to be sluggish, due to unfavorable comparisons with the prior quarter. Notably, the company expects fourth-quarter system-wide RevPAR growth in the range of 4% to 6%.
However, Hilton’s international presence makes it vulnerable to lingering political uncertainty and economic downturns. In Brazil, the company’s business would continue to suffer due to the weak macroeconomic environment. Apart from this, in the Asia Pacific, an economic slowdown in China would hurt the company’s top line.
Meanwhile, currency headwinds linger as a stronger U.S. dollar erodes the value of overseas sales. These factors would hurt revenues and profits of the company in the fourth quarter. On the cost front, elevated expenses would continue to hurt profits as it has been doing over the past couple of quarters.
Earnings Whispers
Our proven model does not conclusively show that Hilton Worldwide is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.
Zacks ESP: Hilton Worldwide has an earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 22 cents.
Zacks Rank: Hilton Worldwide has a Zacks Rank #3 which, when combined with a 0.00% ESP, makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement.
Stocks to Consider
Here are some stocks in the consumer discretionary sector that investors may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Vail Resorts Inc. MTN, with an Earnings ESP of +2.06% and a Zacks Rank #2.
Nutrisystem, Inc. NTRI, with an Earnings ESP of +5.26% and a Zacks Rank #3.
SeaWorld Entertainment, Inc. SEAS, with an Earnings ESP of +10.00% and a Zacks Rank #2.
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HILTON WW HLDG (HLT): Free Stock Analysis Report
SEAWORLD ENTERT (SEAS): Free Stock Analysis Report
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