Hilton Worldwide Holdings Inc. HLT is currently one of the top-performing stocks in the hotel space. This is quite evident from the company’s share price movement and strong fundamentals.
Therefore, if you haven’t taken advantage of the share price appreciation yet, it’s time you add the stock to your portfolio.
Why an Attractive Pick?
Price Performance: A look at Hilton’s price trend reveals that the stock has witnessed an impressive run on the bourse last year. The company has returned 40.2%, massively outperforming the S&P 500’s gain of 15.4%.
The price surge was owing to investor’s optimism surrounding the stock, given that Hilton’s scale, size, commercial platform, industry-leading brands and solid loyalty program continue to drive growth. In fact, it is also considered to be one of the fastest growing global hospitality company (on an organic basis), with presence in 105 countries and territories.
Also, Hilton continues to make immense progress in its luxury development strategy, anticipating double-digit luxury growth for the next several years. Additionally, the company’s new brands – Home2 Suites, Tru by Hilton, Tapestry Collection – are gaining momentum globally.
Furthermore, the company has created one of the largest loyalty programs, Hilton Honors. With about 71 million members, this network has created an extremely valuable asset for the Hilton. In fact, about 57% of all occupancy per night takes place through this member program.
In the meantime, innovations such as the Hilton Honors app continue to drive growth of the program. Apart from being the company’s fastest growing and lowest cost distribution channel, this app offers a differentiated customer experience. We believe that large market share gains lie ahead for Hilton, given encouraging demand for hotels in the United States.
Solid Rank & Momentum Score: Hilton carries a Zacks Rank #2 (Buy). Also, the company has outperformed the industry in the 52-week time frame, leading to a Momentum Score of A . Thus, indicating that the stock has robust fundamentals to outperform in the near term.
Northward Estimate Revisions: Nine estimates for 2018 moved north in the past 60 days versus no southward revisions, reflecting analysts’ confidence in the company. Over the same period, the Zacks Consensus Estimate for the current year climbed 15.9%.
We believe Hilton’s capital-light business model will continue to drive market share, units, free cash flow as well as maintain the company’s strong balance sheet and accelerating earnings and return of capital.
In fact, Hilton transformed into a capital-light operating business backed by the spin-offs of a portfolio of hotels and resorts as well as its timeshare business. Post-spin off, the company is a resilient, fee-driven business with a disciplined strategy.
Positive Earnings Surprise History: Hilton has an impressive earnings surprise history. Evidently, the company outpaced the Zacks Consensus Estimate in the trailing four quarters, delivering a positive average earnings surprise of 18.6%. Given solid expansion efforts to boost growth, the stock seems to have decent upside potential.
Strong Growth Prospects: Arguably, earnings growth is of utmost importance for determining a stock’s potential as surging profit levels often indicate solid prospects (and stock price gains). The Zacks Consensus Estimate for 2018 earnings of $2.62 reflects year-over-year growth of 31%. Additionally, the stock has long-term earnings growth rate of 5.3%.
Notably, this strong earnings growth prospect is justified, given the company’s strong hotel performance and non-RevPAR driven fees.
Hilton Worldwide Holdings Inc. Net Income (TTM)
Hilton Worldwide Holdings Inc. Net Income (TTM) | Hilton Worldwide Holdings Inc. Quote
Other Stocks to Consider
Other stocks worth considering in the Zacks Consumer Discretionary sector include Intercontinental Hotels Group IHG , Marriot Vacations Worldwide VAC and Las Vegas Sands LVS , each carrying a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here .
Intercontinental Hotels Group, Marriot Vacations and Las Vegas Sands are expected to witness a respective 18.9%, 16.1% and 9.5% increase in 2018 earnings.
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Las Vegas Sands Corp. (LVS): Free Stock Analysis Report
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Hilton Worldwide Holdings Inc. (HLT): Free Stock Analysis Report
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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.