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What's in Store for Hilton (HLT) This Earnings Season? (revised)

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What's in Store for Hilton (HLT) This Earnings Season? (revised)

Hilton's (HLT) relentless expansion strategies coupled with an asset-light business model and a solid loyalty program bode well for the company.

Hilton Worldwide Holdings Inc. HLT is scheduled to report second-quarter 2018 numbers on Jul 25, before market open. In the trailing four quarters, the company’s earnings have surpassed the Zacks Consensus Estimate by an average of 11.6%.

Also, Hilton’s remarkable scale, size and commercial platform, industry-leading brands as well as robust earnings surprise history have led to the company impressive price performance. In a year’s time, shares of the company's have rallied 28.2%, outperforming the industry’s 10.4% rise.

Q2 Expectations

The question lingering in investors’ minds now is whether Hilton will be able to deliver a positive earnings surprise in the quarter to be reported. The Zacks Consensus Estimate for second-quarter earnings is pegged at 70 cents, higher than 52 cents reported in the year-ago quarter. Of late, the company’s earnings estimates for the second quarter have been stable. In first-quarter 2018, it witnessed earnings growth of 44.7% on a year-over-year basis.

Meanwhile, analysts polled by Zacks expect revenues of nearly $2,451 million, up 4.5% from the prior-year quarter.

Let’s delve deeper to find out how the company’s top and bottom line will shape up this earnings season.

Factors at Play

In the second quarter, the company’s top and bottom line are expected to improve on a year-over-year basis. In fact, Hilton’s relentless expansion strategies coupled with an asset-light business model and a solid loyalty program put the company on growth trajectory amid a competitive industry. Moreover, management anticipates system-wide RevPAR to increase 3-4% year over year on a comparable as well as currency-neutral basis. The company also expects management and franchise fee revenues to improve in the band of 7-9% year over year.

In a bid to maintain its position as the fastest-growing global hospitality company, Hilton is continuing to drive unit growth. In 2017, the company witnessed net unit growth of 51,600 rooms. Hilton too expanded its footprint across new countries, totaling 105 countries and territories. For 2018, it projects an approximate 6.5% net unit growth. These apart, the company continues to have more rooms under construction in Europe, the Middle East and Asia Pacific than any other hotel chain. In line with the expansion strategy, Curio Collection has launched a hotel in Lynchburg, VA. In the coming months, it will launch an upscale and luxury hotel in Seattle, Cincinnati and Pittsburgh.

In first-quarter 2018, Hilton witnessed adjusted EBITDA growth of 9% to $455 million. The positive trend is likely to continue in the second quarter as well. Management expects adjusted EBITDA between $530 million and $550 million in the soon-to-be-reported quarter.

Additionally, the company’s margins are benefited from strong ReVPAR growth and efficient cost control. Also, a capital-light business model allows Hilton to receive a higher return on lesser invested capital.

Hilton Worldwide Holdings Inc. Price, Consensus and EPS Surprise

Hilton Worldwide Holdings Inc. Price, Consensus and EPS Surprise | Hilton Worldwide Holdings Inc. Quote

What Does the Zacks Model Unveil?

Our proven model does not show that Hilton is likely to beat earnings estimates in second-quarter 2018. 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. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Hilton has an Earnings ESP of 0.00%. Although, the company’s Zacks Rank #3 increases the predictive power of ESP, we need to have a positive ESP to be confident about an earnings surprise.  You can see the complete list of today’s Zacks #1 Rank stocks here.

Key Picks

Here are a few other stocks from the Hotels and Motels space that investors may consider as our model shows that they have the right combination of elements to post an earnings beat in the second quarter:

Extended Stay America, Inc. STAY has an Earnings ESP of +3.38% and a Zacks Rank #2.

Marriott Vacations Worldwide Corp. VAC has an Earnings ESP of +1.74% and a Zacks Rank of 3.

Peak Resorts, Inc. SKIS has an Earnings ESP of +3.15% and a Zacks Rank #3.

(NOTE: We are reissuing this article to correct a mistake. The original article, issued yesterday, July 17, 2018, should no longer be relied upon.)


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