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Hilton (HLT) to Report Q4 Earnings: What's in the Offing?

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Hilton Worldwide Holdings Inc. (HLT - Free Report) is scheduled to report fourth-quarter 2019 results on Feb 11, before the opening bell. In the last reported quarter, the company’s earnings and revenues topped the Zacks Consensus Estimate by 2.9% and 0.8%, respectively. Moreover, the bottom and top lines rose 13% and 6.3%, respectively, on a year-over-year basis.

Trend in Estimate Revision

The Zacks Consensus Estimate for fourth-quarter earnings is pegged at 95 cents per share, which suggests a 20.3% increase from 79 cents reported in the year-ago period. Notably, earnings estimates for the quarter have been stable in the past 30 days. The consensus mark for revenues is pegged at $2,337 million, which calls for a 2.1% increase from the prior-year reported figure.

Let’s discuss the factors that are likely to be reflected on the upcoming quarterly results.

Factors at Play

The company’s fourth-quarter revenues are likely to have registered a modest increase owing to a slowing macro environment. Nonetheless, the company’s focus on unit expansion plans, robust loyalty program and a marginal rise in revenue per available room (RevPAR) remained positives. Impressive performance of the company’s latest brands including Home2 Suites, Tru by Hilton and Tapestry Collection is likely to reflect on fourth-quarter results.

The Zacks Consensus Estimate for fourth-quarter RevPAR suggests a 0.5% year-over-year increase but 8.7% sequential decline. Hilton projects system-wide RevPAR to be flat on a currency-neutral basis. However, system-wide average daily rate is expected to drop 0.3% year over year and 0.7% from the third quarter.

The company’s Franchise and licensing fees, Incentive management fees, as well as Base and other management fees are likely to have contributed to its performance in the to-be-reported quarter.

This is clearly evident from the Zacks Consensus Estimate for fourth-quarter metrics. The consensus estimate for Franchise and licensing fees is pegged at $408 million, which suggests a 5.2% rise from the year-ago period but 7.9% sequential decline. The company anticipates management and franchise fee revenues to improve 3-5% year over year. Also, the consensus mark for Base and other management fees suggests an increase of 1.3% year over year to $81 million. The figure indicates no change on a sequential basis. Incentive management fees are likely to increase 1.6% year over year and 16.7% sequentially.

Despite registering modest growth in the top line owing to softer RevPAR performance, the company’s earnings are expected to have gained significantly driven by higher EBITDA margin, courtesy of greater cost control. Adjusted EBITDA is envisioned within $563-$583 million, indicating an increase from $544 million in the fourth quarter of 2018.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Hilton this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Hilton currently carries a Zacks Rank #3 and has an Earnings ESP of 0.00%.

Stocks With Favorable Combination

Here are some stocks from the Consumer Discretionary sector that investors may consider, as our model shows that these have the right combination of elements to post an earnings beat in the to-be-reported quarter:

Melco Resorts & Entertainment Limited (MLCO - Free Report) currently has an Earnings ESP of +11.34% and a Zacks Rank #3.

Mattel, Inc. (MAT - Free Report) has an Earnings ESP of +850.00% and currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Boyd Gaming Corporation (BYD - Free Report) has an Earnings ESP of +7.42% and a Zacks Rank #3, at present.

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