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Hilton (HLT) to Report Q1 Earnings: What's in the Cards?

Zacks Equity Research

Hilton Worldwide Holdings Inc. HLT is slated to report first-quarter 2019 results on May 1, before the opening bell. In the last reported quarter, the company’s earnings surpassed the Zacks Consensus Estimate by 14.5%. Notably, in three of the trailing four quarters, the bottom line outpaced the consensus mark by a margin of 6.3%.

Q1 Expectations

The Zacks Consensus Estimate for first-quarter earnings is pegged at 76 cents, indicating a 38.2% rise from the year-ago quarter number. Of late, the company’s earnings estimates have been stable. For quarterly revenues, the consensus mark is pinned at nearly $2.22 billion, suggesting growth of 7.2% from the prior-year quarter figure.
    
Let us delve deeper into factors that are likely to shape Hilton’s first-quarter 2019 results.

Factors at Play

Hilton’s top line in the to-be-reported quarter is likely to be driven by unit growth. In a bid to maintain its position as the fastest-growing global hospitality company, Hilton is consistently driving unit growth.  During the fourth quarter of 2018, Hilton opened 142 hotels, taking the total room count to 22,500. It also achieved net unit growth of 19,000 rooms, indicating roughly 7% increase from the prior-year quarter.

We believe that the improving economic indicators coupled with the company’s robust expansion strategies, industry-leading loyalty program and an asset-light business model are likely to aid Hilton’s performance in the first quarter. Meanwhile, the company continues to progress well with its luxury development strategy, anticipating double-digit luxury growth moving ahead.

Backed by a solid demand for leisure travel, Hilton has been witnessing robust growth in revenue per available room (RevPAR). The company expects system-wide RevPAR to increase 1-3% year over year on a comparable as well as a currency-neutral basis in the to-be-reported quarter. Also, growing middle-class population in China is leading to strong demand for hospitality services. Further, Europe’s RevPAR trend is being supported by favorable exchange rates as well as strength in regions like Spain, the United Kingkom, Germany and Turkey.

The company’s largest loyalty program, Hilton Honors, is an added positive. With more than 85 million members, this network created an extremely valuable asset for the company. The program has also been boosting occupancy rate.

We believe that first-quarter earnings growth has been favored by the company’s capital-light business model. Further, consistent improvement in EBITDA margins has been favoring Hilton’s bottom-line growth.

Hilton Worldwide Holdings Inc. Price and EPS Surprise

Hilton Worldwide Holdings Inc. Price 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 first-quarter 2019. 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. Zacks Rank #4 (Sell) or 5 (Strong Sell) stocks are best avoided, especially if they have a negative Earnings ESP. 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% and a Zacks Rank #3.  You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks Poised to Beat Earnings Estimates

Here are some stocks from the Consumer Discretionary sector that investors may consider as our model shows that these have the right combination of elements to come up with an earnings beat in the to-be-reported quarter:

Hyatt Hotels Corporation H has an Earnings ESP of +5.32% and a Zacks Rank #3. The company is scheduled to report quarterly numbers on May 1.

SeaWorld SEAS has an Earnings ESP of +16.13% and a Zacks Rank #1. The company is scheduled to report quarterly numbers on May 7.

PlayAGS, Inc. AGS has an Earnings ESP of +22.22% and a Zacks Rank #2.

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