Is A Beat In Store For Hilton (HLT) This Earning Season?

We expect Hilton Worldwide Holdings Inc. (NYSE:HLT) to beat expectations when it reports first-quarter 2017 numbers on May 2, before the opening bell.

Last quarter, this leading global hospitality company posted positive earnings surprise of 7.69%. In fact, the company outpaced/met earnings estimates in three of the trailing four-quarters with an average beat of 2.52%.

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

Why a Likely Positive Surprise?

Our proven model shows that Hilton is likely to beat earnings because it has the perfect combination of the two key ingredients.

Zacks ESP: Hilton Brands has an Earnings ESP of +10.71%. This is because the Most Accurate estimate is 31 cents, while the Zacks Consensus Estimate is pegged lower at 28 cents. A favorable Earnings ESP serves as a meaningful indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Hilton currently carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings estimates. Conversely, sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.

The combination of Restaurant Brands favorable Zacks Rank and positive Earnings ESP makes us reasonably confident of an earnings beat.

What is Driving Better-than-Expected Earnings?

Hilton witnessed growth in its system-wide revenue per available room (RevPAR) in the fourth quarter, primarily owing to better-than-expected transient demand. The company’s geographic exposure, solid transient business as well as improving group business trends are expected to have continued driving RevPAR in the to-be-reported quarter as well.

Notably, system-wide RevPAR growth is projected to be in the band of 1–3% in the first quarter of 2017. Further, adjusted earnings are anticipated to be between 24 cents and 29 cents, while adjusted EBITDA (Earnings before Interest, Tax, Depreciation, and Amortization) is expected in the band of $380 million to $400 million.

Moreover, the company expects first-quarter results to be buoyed by strong unit development and tremendous growth in loyalty program given its scale, size, industry-leading brands and commercial platform.

However, Hilton’s international presence makes it vulnerable to lingering political uncertainties and economic downturns in certain parts of the world. We believe, unfavorable currency translations could also continue to hurt the top line.

Other Stocks that Warrant a Look

Hilton is not the only company looking up this earnings season. Here are some other companies to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:

La Quinta Holdings Inc. (NYSE:LQ) has an Earnings ESP of +50.00% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

SeaWorld Entertainment, Inc. (NYSE:SEAS) has an Earnings ESP of +9.43% and a Zacks Rank #3.

Red Lion Hotels Corporation (NYSE:RLH) has an Earnings ESP of +3.33% and a Zacks Rank #3.

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