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What's in the Cards for Hilton (HLT) this Earnings Season?

Hilton Worldwide Holdings Inc. HLT is scheduled to report second-quarter 2017 numbers on Jul 26, before the opening bell.

Last quarter, this leading global hospitality company pulled off positive earnings surprise of 35.71%. In fact, the company outpaced/met earnings estimates in three of the trailing four-quarters with an average beat of 9.89%.

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

Factors Likely to Affect Q2 Results

Hilton witnessed growth in its system-wide revenue per available room (RevPAR) in the first quarter, primarily owing to better-than-expected transient demand and strong group performance. We expect the trend to have continued driving RevPAR in the to-be-reported quarter, as well.

System-wide RevPAR growth is projected to be in the band of 1—3% in the second quarter. However, the unfavorable calendar shift is likely to result in growth in the lower half of the range. Meanwhile, adjusted earnings are anticipated to be between 47 cents and 51 cents, while adjusted EBITDA (Earnings before Interest, Tax, Depreciation, and Amortization) is expected in the band of 490 million to $510 million.

Notably, the spin-offs in Jan 2017 have made Hilton a fee-based, capital efficient, and resilient business, which should drive organic growth in the to-be-reported quarter.

Resultantly, Hilton expects second-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. Also, the company’s new brands that have been developed at minimal cost have been faring quite well and are expected to propel the quarter’s top line.

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 hurt the top line in the to-be-reported quarter as well.

Earnings Whispers

Our proven model does not conclusively show an earnings beat for Hilton this quarter. 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. Unfortunately, that is not the case here as elaborated below.

Zacks ESP: Hilton has an Earnings ESP of -2.00%. This is because the Most Accurate estimate is 49 cents, while the Zacks Consensus Estimate is pegged higher at 50 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Hilton currently holds a Zacks Rank #2, which increases the predictive power of ESP. However, the company’s negative ESP makes surprise prediction difficult.

Notably, we caution you 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.

Stocks to Consider

Here are some companies to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

Live Nation Entertainment, Inc. LYV has an Earnings ESP of +31.25% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

SeaWorld Entertainment, Inc. SEAS has an Earnings ESP of +5.88% and a Zacks Rank #3.

Wyndham Worldwide Corporation WYN has an Earnings ESP of +1.33% and a Zacks Rank #3.

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Wyndham Worldwide Corp (WYN): Free Stock Analysis Report
Hilton Worldwide Holdings Inc. (HLT): Free Stock Analysis Report
Live Nation Entertainment, Inc. (LYV): Free Stock Analysis Report
SeaWorld Entertainment, Inc. (SEAS): Free Stock Analysis Report
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