Marriott Vacations' 2014 Earnings Upped Despite Q3 Miss
Marriott Vacations Worldwide Corp. (VAC) posted third-quarter 2014 results, wherein both earnings and revenues missed the Zacks Consensus Estimate. Adjusted paired earnings of 81 cents per share missed the Zacks Consensus Estimate of 82 cents by a penny, due to lower-than-expected revenues. However, it increased 12.5% year over year owing to an increase in revenues and improved margins.
Despite the miss, the vacation ownership company’s shares were up more than 6% in the trading session on Oct 16, as increased earnings guidance boosted investors’ confidence.
This timeshare company posted net revenue of $413 million, missing the Zacks Consensus Estimate of $418 million by 1.2%. However, it increased 0.7% year over year. The year over year increase reflects strong volume per guest (VPG) growth in North America.
Behind the Headline Numbers
Total company contract sales were $172 million, up 2.4% year over year, driven by higher vacation ownership contract sales in the company's North America, Europe and Asia segments, partially offset by lower residential contract sales in its North America segment.
Rental revenues were $65 million, flat with the year-ago quarter, mainly as an increase in transient keys rented was offset by lower plus point revenues. Rental revenues, net of expenses, were $11 million, a 28% increase from the third quarter of 2013.
Resort management and other services revenues were $67 million, a 3.1% increase from the third quarter of 2013. Resort management and other services revenues, net of expenses, were $23 million, a rise of 15% from the year-ago quarter.
Adjusted development margin increased 230 basis points (bps) year over year to 22.6% quarter. Company development margin increased 40 bps year over year to 21.5% in the third quarter of 2014, whereas North America development margin for the quarter increased 170 bps year over year to 24.4% driven by improvement in product cost, offset by increases in marketing and sales expenses.
Segment Results
North America
North America VPG increased 6.9% year over year to $3,477 in the third quarter of 2014, driven mainly by an increase in the average number of points purchased per contract, higher pricing and a modest improvement in closing efficiency. North American vacation ownership contract sales were $148 million in the third quarter, increasing 2.1% year over year. Total contract sales were $153 million, up 0.7% year over year.
Asia Pacific
Asia Pacific contract sales increased 14.3% year over year to $8 million.
Europe
Contract sales improved 22.2% year over year to $11 million.
2014 Earnings Guidance Upped
Marriott Vacations has updated the earnings guidance for 2014. The company now expects adjusted earnings to range from $2.67 to $2.84 per share, up from the $2.64 to $2.82 range.
Adjusted free cash flow is expected within $230 to $245 million, up from $190 to $205 million.
However, the company reaffirmed some of its guidance for 2014. Adjusted EBITDA is expected in the range of $190 to $200 million, whereas adjusted net income is expected to range within $93 to $99 million.
Adjusted development margin is expected to range within 21% to 22%. North American adjusted development margin is expected to range between 23% and 24%.
The company expects contract sales growth in the range of 1–3% in 2014. However, the North American contract sales growth is expected to be flat to up 2%.
Other Stocks to Consider
Marriott Vacations presently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the hotel industry include Choice Hotels International Inc. (CHH) and Hilton Worldwide Holdings Inc. (HLT). While Choice Hotels sports a Zacks Rank #1 (Strong Buy), Hilton Worldwide carries a Zacks Rank #2 (Buy). In the broader consumer discretionary sector, Vail Resorts Inc. (MTN), carrying a Zacks Rank #2 can also be considered.
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