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Hilton's (HLT) Q3 Earnings: Unit Expansion to Drive Growth


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Hilton Worldwide Holdings Inc.HLT is slated to report third-quarter 2018 results on Oct 24, before the opening bell.

The company's scale, size, commercial platform and industry-leading brands continue to drive unit growth. With the spin-off of a portfolio of hotels and resorts, as well as its timeshare business, Hilton transformed into a capital-light operating business. Meanwhile, the company's industry-leading loyalty program continues to drive occupancy.

All these factors are expected to have driven Hilton's top- and bottom-line growth in the third quarter.

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 0.4% in the past year compared with the industry 's decline of 16%.


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

Top Line to Gain From Solid Expansion Strategies

The Zacks Consensus Estimate pegs revenues of $2.41 billion for Hilton's third quarter, suggesting 2.4% 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. In the first quarter of 2018, the company achieved net unit growth of 7,100 rooms and witnessed a 7% increase from the prior-year quarter.

Further, during the second quarter, Hilton opened 123 hotels, taking room count to 17,100. The company achieved net unit growth of 15,800 rooms, indicating an 18% increase from the prior-year quarter.

For 2018, it projects approximately 6.5% net unit growth. It continues to have more rooms under construction in Europe, the Middle East and the Asia Pacific compared with any other hotel chain.

Moreover, strong demand for leisure travel has been driving Hilton's revenue per available room (RevPAR). Subsequently, the consensus estimate predicts third-quarter RevPAR to grow 2.6% year over year. The company expects system-wide RevPAR to increase 2.5-3% year over year, on a comparable as well as a currency-neutral basis in the to-be-reported quarter.

Bottom Line to Grow

Hilton expects third-quarter adjusted earnings of 71-76 cents per share. The consensus estimate predicts earnings of 75 cents per share, reflecting 33.9% year-over-year growth.

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 show that Hilton is likely to beat earnings estimates in third-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 -1.18%. Although the company's Zacks Rank #3 increases the predictive power of ESP, we need to have a positive ESP to be confident about an earnings surprise.

Hilton Worldwide Holdings Inc. Price and EPS Surprise

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



Stocks to Consider

Here are some companies from the Consumer Discretionary sector that are poised to record an earnings beat this quarter.

Acushnet Holdings GOLF has an Earnings ESP of +28.57% and a Zacks Rank #3. The company is slated to report quarterly results on Nov 1.

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

Malibu Boats MBUU has an Earnings ESP of +3.64% and a Zacks Rank #1. The company is expected to report quarterly numbers on Nov 6.

MCBC Holdings MCFT is scheduled to report quarterly results on Nov 8. The company flaunts a Zacks Rank #1 and has an Earnings ESP of +0.49%.

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Malibu Boats, Inc. (MBUU): Free Stock Analysis Report

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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: HLT , GOLF , MCFT , MBUU



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