Factors Setting the Tone for Hilton (HLT) Q2 Earnings

Hilton Worldwide Holdings Inc. HLT is scheduled to report second-quarter 2020 results on Aug 6, before the opening bell. In the last-reported quarter, the company’s earnings surpassed the Zacks Consensus Estimate by 64.4%.

Q2 Estimates

The Zacks Consensus Estimate for second-quarter bottom line is pegged at a loss of 34 cents, suggesting deterioration from earnings of $1.06 in the prior-year quarter. The company’s earnings estimates have witnessed downward revisions over the past 30 days, reflecting analyst concern regarding the stock.

For revenues, the consensus mark stands at $597.1 million, suggesting a decline of 76% from the year-ago quarter.

Let’s analyze the factors that are likely to make an impact this earnings season.

Hilton Worldwide Holdings Inc. Price and EPS Surprise

Hilton Worldwide Holdings Inc. price-eps-surprise | Hilton Worldwide Holdings Inc. Quote

Factors at Play

The coronavirus pandemic is likely to have negatively impacted Hilton’s second-quarter performance. Although occupancy rates are improving in greater parts of China, rise in COVID-19 cases along with quarantines and travel restrictions across the world are likely to have affected the top line. Also, high operating costs stemming from the pandemic are likely to get reflected in the second-quarter results. Notably, the Zacks Consensus Estimate for RevPAR is currently pegged at $24.6 million, indicating a decline of 79.2% from $118 million reported in the previous quarter.

Moreover, dismal performance across the company’s Franchise and licensing fees, Incentive management fees as well as Base and other management fees is likely to get reflected in the second-quarter top line.

The consensus estimate for Franchise and licensing fees is pegged at $104 million, indicating a decline of 76.6% from $444 million reported in the previous quarter. Incentive management fees are currently projected at $2.3 million, indicating a decline of 96.1% from $58 million in the year-ago quarter. Base and other management fees are estimated at $17.8 million, indicating a decline of 80.1% from $89 million in the year-ago quarter.

Nonetheless, increased focus on digital traffic along with unit expansion strategies, loyalty program and asset-light business model is likely to have aided the company’s performance in the to-be-reported quarter.

What Our Model Says

Our proven model does not conclusively predict an earnings beat for Hilton this time around. A stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to beat earnings. But that's not the case here.

Earnings ESP: Hilton has an Earnings ESP of +5.70%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company has a Zacks Rank #4 (Sell).

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

Stock With Favorable Combinations

Here are some stocks from the Zacks Consumer Discretionary space that investors may consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Vista Outdoor Inc. VSTO has a Zacks Rank #2 and an Earnings ESP of +1300.12%

Callaway Golf Company ELY has a Zacks Rank #3 and an Earnings ESP of +222.5%

Acushnet Holdings Corp. GOLF has a Zacks Rank #3 and an Earnings ESP of +180.01%

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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.