Virginia-based hotelier Hilton Worldwide Holdings Inc. (HLT) is set to report second-quarter 2014 results on Aug 1, 2014. Last quarter, the company posted a positive earnings surprise of 50.00%. Let’s see how things are shaping up for this announcement.
Factors to Consider This Quarter
Hilton has seen strong U.S. revenue per available room (RevPAR) and we expect the trend to continue in the second quarter as well. Hilton’s geographic exposure in the U.S., as well as its improving group business trends, will be the major drivers of RevPAR. The company has been beating the Zacks Consenus mark in the quarters reported so far.
Internationally, Hilton aggressively expanded in high-growth emerging markets like China. Despite the slowdown in the Chinese economy, we believe Asia Pacific will be able to boost revenues, primarily backed by higher tourism numbers.
However, we are concerned about the sluggish macroeconomic environment in Europe, coupled with pockets of political uncertainty in parts of Africa, which might hurt Hilton’s profitability in the second quarter.
Earnings Whispers?
Our proven model does not conclusively show that Hilton is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Negative Zacks ESP: Hilton’s ESP is -5.26% since the Most Accurate Estimate stands at 18 cents per share, while the Zacks Consensus Estimate is higher at 19 cents.
Zacks Rank #2 (Buy): Hilton’s Zacks Rank #2 when combined with a negative ESP makes surprise prediction difficult. Note that the Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.
Other Stocks to Consider
Here are some companies in the same sector that investors may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Choice Hotels International Inc. (CHH), with an Earnings ESP of +2.04% and a Zacks Rank #2 (Buy).
Six Flags Entertainment Corporation (SIX), with an Earnings ESP of +0.65% and a Zacks Rank #3 (Hold).
MGM Resorts International (MGM), with an Earnings ESP of +45.46% and a Zacks Rank #3.
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