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Hilton's (HLT) Q1 Earnings: Unit Expansion to Drive Results


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Hilton Worldwide Holdings Inc. HLT is scheduled to report first-quarter 2018 numbers on Apr 26, before market open.

The hotelier's aggressive expansion strategies and industry leading loyalty program are expected to have majorly aided revenues in the first quarter. Moreover, a capital-light business model, efficient cost management and steady revenue per available room growth (ReVPAR) are expected to reflect in the company's earnings in the to-be-reported quarter.

Also, Hilton's remarkable scale, size, commercial platform and industry-leading brands have helped the company show impressive price performance. The company's shares have rallied 41.9%, outperforming the industry 's gain of 30.9%.


Let's find out how Hilton's first-quarter results will shape up.

Top Line to Grow on Expansion Strategies & Loyalty Program

The Zacks Consensus Estimate for revenues in the first quarter is pegged at $2.26 billion, reflecting 4.4% year-over-year growth. In 2017, the company witnessed revenue growth of 23.8% from 2016 and the upside trend is likely to continue in the first quarter as well. Moreover, for the to-be-reported quarter, management expects system-wide RevPAR to witness a year-over-year increase of 1-3% on a comparable and currency-neutral basis.The consensus estimate for the same is pegged at $102 million. Also, for the to-be-reported quarter, the company expects its management and franchise fee revenues to increase in the band of 8-10% year over year.

This prospective growth is attributable to the company's relentless expansion strategies and a strong loyalty program. In a bid to maintain its position as the fastest-growing global hospitality company, Hilton is continuing to drive unit growth. In 2017, Hilton witnessed net unit growth of 18,400 rooms. Further, the company expanded its footprint across new countries totaling 105 countries and territories. For 2018, the company projects an approximate 6.5% net unit growth. It also continues to have more rooms under construction in Europe, the Middle East and Asia Pacific than any other hotel chain.

Meanwhile, Hilton has created one of the largest loyalty programs, Hilton Honors. With about 71 million members, this network has created an extremely valuable asset for the company. In 2017, the company added more than 11 million members to the program. The company continues to make multiple enhancements to its loyalty program in order to make it the most customer-centric program, driving incremental value for guests and the overall system, thereby driving revenues.

Earnings Likely to See Growth

Hilton saw adjusted EBITDA to grow 11% to $1,965 million in 2017, compared with $1,763 million in 2016. The positive trend is likely to continue in the first quarter as well since management posted adjusted EBITDA in the $410-$430 million band.

The company's margins are benefited by strong ReVPAR growth and efficient cost control. Also, a capital-light business model allows the company to receive a greater return on lesser invested capital. This is additionally a riveting factor for Hilton's profits to grow.

Subsequently, the consensus estimate pegs earnings in the first quarter at 50 cents, suggesting 31.6% year-over-year growth. This exceeds the company's expected earnings in the range of 43-47 cents per share for the to-be-reported quarter.

Our Quantitative Model Predicts a Beat

Hilton has the right combination of two main ingredients - a positive  Earnings ESP  and a Zacks Rank #3 (Hold) or higher - for increasing the odds of an earnings beat.

Zacks ESP:  The company has an Earnings ESP of +3.09%. You can uncover the best stocks to buy or sell before they're reported with our  Earnings ESP Filter .

Zacks Rank:  Hilton has a Zacks Rank #3. You can see  the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

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

Hilton Worldwide Holdings Inc. Price and EPS Surprise

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

Other Stocks to Consider

Here are a few other stocks from the  Consumer Discretionary sector that investors may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Wynn Resorts WYNN has an Earnings ESP of +5.45% and a Zacks Rank #3. The company is scheduled to report quarterly numbers on Apr 24.

Royal Caribbean RCL has an Earnings ESP of +0.50% and a Zacks Rank #2 (Buy). The company is slated to report quarterly figures on Apr 26.

Extended Stay America STAY has an Earnings ESP of +3.50% and a Zacks Rank #3. The company is scheduled to report quarterly numbers on Apr 26.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: WYNN , STAY , HLT , RCL



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