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5 Reasons Why You Should Add Hilton (HLT) to Your Portfolio


Hilton Worldwide Holdings Inc. HLT is currently one of the top-performing stocks in the hotel space and a rise in share price and strong fundamentals signal its bullish run.

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 witnessed an impressive run on the bourse last year. The company has returned 47.4%, massively outperforming the S&P 500’s gain of 21.5%.

The price surge seems to be the result of strong investor optimism around the stock, given that Hilton’s scale, size, commercial platform, industry-leading brands and solid loyalty program continue to drive growth. Hilton maintains its position as the fastest growing global hospitality company on an organic basis with presence in 104 countries and territories.

The company continues to make great progress in its luxury development strategy, anticipating double-digit luxury growth for the next several years. Hilton’s new brands including Home2 Suites, Tru by Hilton, Tapestry Collection are also gaining momentum globally.

Hilton has created one of the largest loyalty programs, Hilton Honors. With about 70 million members, this network has created an extremely valuable asset for the company. 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. In addition to being the company’s fastest growing and lowest cost distribution channel, this app also offers a differentiated customer experience. The company has also begun deploying its industry-leading digital key outside the United States and remains on track to have nearly 50% of its system equipped with this guest-centric capability by year-end.

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 4-week and 12-week time frames, leading to a Momentum Score of B. These indicate that the stock has robust fundamentals and expectations of outperformance in the near term.

Northward Estimate Revisions: Four 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 2018 increased 8%. This is encouraging ahead of the earnings season.

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.

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. The company outpaced the Zacks Consensus Estimate in the trailing four quarters, delivering a positive average earnings surprise of 19.18%. Given solid expansion efforts to boost growth, the stock seems to have decent upside potential.

Hilton Worldwide Holdings Inc. Price and EPS Surprise

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 $2.43 reflects year-over-year growth of 27.7%. The stock has long-term expected earnings per share growth rate of 5.3%.

This strong earnings growth prospect is justified given the company’s strong hotel performance and non-RevPAR driven fees.

Other Picks

Other stocks worth considering in the Zacks Consumer Discretionary sectorare Wynn Resorts WYNN, Melco Resorts & Entertainment MLCO and Boyd Gaming Corp. BYD, each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Wynn Resorts, Melco Resorts and Boyd Gaming are expected to witness a respective 24.8%, 19.8% and 31.7%, increase in 2018 earnings.

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