Unit Growth & Strong RevPAR To Aid Hilton (HLT) Q4 Earnings

Hilton Worldwide Holdings Inc. (NYSE:HLT) is slated to report fourth-quarter 2018 results on Feb 13, before the opening bell.

The company’s scale, size, commercial platform and industry-leading brands continue to drive unit growth. Hilton’s broad geographic diversity lowers the effect of volatility in individual markets. Further, through continual expansion, the company is likely to have secured top-line growth in the fourth quarter. Meanwhile, the company’s capital-light business is likely to have improved operations in the fourth quarter and thereby boosting profits.

However, challenging economic conditions in some key operating regions, along with stiff competition, have been hurting Hilton of late. The company’s shares have lost 7.5% in the past year compared with the industry’s decline of 22.5%.

Let us delve deeper into factors that are likely to have shaped Hilton’s fourth quarter.

Unit Expansion to Drive Top-Line Growth

In the first nine months of 2018, Hilton’s total revenues increased 9.2% from the year-ago level and the upside trend is expected to have continued in the fourth quarter. The Zacks Consensus Estimate pegs revenues of $2.3 billion for Hilton in the fourth quarter, suggesting 1.9% growth from the year-ago quarter. We believe that top-line growth is attributable to the company’s relentless expansion strategies.

In a bid to maintain its position as the fastest-growing global hospitality company, Hilton is continuing to drive unit growth. During the third quarter, Hilton opened 113 hotels, taking the room count to 16,100. The company achieved net unit growth of 14,800 rooms, indicating a 24% increase from the prior-year quarter. For 2018, it projects approximately 6.5% net unit growth.

Moreover, strong demand for leisure travel has been driving Hilton’s revenue per available room (RevPAR). Subsequently, the consensus estimate predicts fourth-quarter system-wide RevPAR growth of 2.9% year over year. The company expects system-wide RevPAR to increase 2-3% year over year, on a comparable as well as a currency-neutral basis in the to-be-reported quarter.

How Will Earnings Shape Up?

Hilton expects adjusted earnings of 66-71 cents per share for the fourth quarter. The consensus estimate predicts earnings of 69 cents per share, reflecting 27.8% year-over-year growth. Earnings also grew more than 60% in the first nine months of 2018, thereby, setting an upward trend.

We believe that 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.

What Does the Zacks Model Unveil?

Our proven model does not predict that Hilton is likely to beat earnings estimates in fourth-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 -1.70%. Presently, the company’s Zacks Rank #4 (Sell) further decreases the predictive power of ESP.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Hilton Worldwide Holdings Inc. Price and EPS Surprise

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:

Penn National (NASDAQ:PENN) has an Earnings ESP of +4.76% and a Zacks Rank #3. The company is scheduled to report quarterly numbers on Feb 7.

SeaWorld (NYSE:SEAS) has an Earnings ESP of +38.46% and it currently sports a Zacks Rank #1. The company is scheduled to report quarterly numbers on Feb 28.

Hudson (NYSE:HUD) has an Earnings ESP of +9.68% and a Zacks Rank #3.

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