Hilton Worldwide (HLT) Q2 Earnings: Surprise In Store?

Hilton Worldwide Holdings Inc. (NYSE:HLT) is set to report second-quarter 2016 results on Jul 27, before market opens.

Last quarter, this leading global hospitality company posted a positive earnings surprise of 6.25%. However, the hotelier delivered positive earnings surprise only once in the past four quarters, resulting in an average negative surprise of 1.85%.

Let’s see how things are shaping up for this announcement.

Factors to Consider

Hilton Worldwide saw strong U.S. revenue per available room (RevPAR) in first quarter 2016 and the trend is expected to continue in the to-be-reported quarter. Hilton’s geographic exposure in the U.S., solid transient business as well as its improving group business trends will continue to drive RevPAR.

System-wide RevPAR growth is expected to be in the range of 3% to 5% on a comparable and currency neutral basis in second quarter 2016.

For the second quarter of 2016, adjusted earnings are projected to be between 25 cents and 27 cents. Adjusted EBITDA is expected to be in a range of $790 million to $810 million.

However, Hilton’s international presence makes it vulnerable to lingering political uncertainty and economic downturns. In Brazil, the company’s business is likely to have suffered from a weak macroeconomic environment and unfavorable currency translations. Apart from this, weakness in Egypt and low leisure demand in the UAE are likely to hurt the company’s top line.

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’s Earnings ESP stands at 0.00%, as both the Most Accurate Estimate and the Zacks Consensus Estimate stand at 26 cents.

Zacks Rank: Though the company’s Zacks Rank #3 increases the predictive power of ESP, Hilton’s ESP of 0.00% makes surprise prediction difficult.

Note that we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks to Consider

Here are some companies that investors may consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Red Lion Hotels Corp. (NYSE:RLH) , with an Earnings ESP of +100.0% and a Zacks Rank #3.

Peak Resorts, Inc. (NASDAQ:SKIS) , with an Earnings ESP of +3.33% and a Zacks Rank #3.

Wynn Resorts Ltd (NASDAQ:WYNN) , with an Earnings ESP of +1.03% and a Zacks Rank #3.

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