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Hilton Worldwide (HLT) Q1 Earnings: Surprise in Store?

Hilton Worldwide Holdings Inc. HLT is set to report first-quarter 2016 results on Apr 27.

Last quarter, the company posted in-line earnings. The hotelier delivered in-line earnings in three of the past four quarters with an average negative surprise of 3.41%.

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

Factors to Consider

Hilton Worldwide saw strong U.S. revenue per available room (RevPAR) in 2015 and the trend is expected to continue in the to-be-reported quarter. System-wide RevPAR growth is expected to be in the range of 2% to 4% in the first quarter.

Hilton’s geographic exposure in the U.S., solid transient business as well as its improving group business trends will continue to drive RevPAR.

However, Hilton’s international presence makes it vulnerable to lingering political uncertainty and economic downturns. In Brazil, the company’s business is likely to have suffered from the weak macroeconomic environment. Apart from this, in the Asia Pacific, an economic slowdown in China is likely to hurt the company’s top line.

Earnings Whispers

Our proven model does not conclusively show that Hilton Worldwide is likely to beat earnings 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. That is not the case here as you will see below.

Zacks ESP: The company’s Earnings ESP stands at -6.25%. This is because both the Most Accurate estimate stands at 15 cents and the Zacks Consensus Estimate is pegged at 16 cents.  

Zacks Rank: Hilton has a Zacks Rank #3, which increases the predictive power of the ESP. However, we need to have a positive ESP to be sure of an earnings beat.

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement.

Stocks to Consider

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

AMC Entertainment Holdings, Inc. AMC, with an Earnings ESP of +5.56% and a Zacks Rank #3.

Royal Caribbean Cruises Ltd. RCL,with an Earnings ESP of +6.45% and a Zacks Rank #2.

Six Flags Entertainment Corp. SIX, with an Earnings ESP of +7.81% and a Zacks Rank #2.

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