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Is a Beat in the Cards for Marriott (MAR) in Q1 Earnings?

Zacks Equity Research

We expect Marriott International, Inc. MAR to beat expectations when it reports first-quarter 2017 numbers on May 8, after market close.

In Sep 2016, Marriott completed its acquisition of Starwood Hotels & Resorts Worldwide Inc., and became the world's largest hotel company.

Last quarter, Marriott posted a positive earnings surprise of 2.41%. In fact, the company’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, with an average beat of 3.05%.

Let’s see how things are shaping up for this announcement.

Marriott International Price and EPS Surprise

 

Marriott International Price and EPS Surprise | Marriott International Quote

Why a Likely Positive Surprise?

Our proven model shows that Marriott is likely to beat on earnings because it has the perfect combination of the two key ingredients.

Zacks ESP: Marriott has an Earnings ESP of +1.11%, because the Most Accurate estimate is 91 cents, while the Zacks Consensus Estimate is pegged at 90 cents. A favorable Zacks ESP serves as a meaningful indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Marriott currently has a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings estimates.

Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.

The combination of Marriott‘s favorable Zacks Rank and positive ESP makes us reasonably confident of an earnings beat this quarter.

What is Driving the Better-than-Expected Earnings?

Marriott’s earnings have been surpassing the Zacks Consensus Estimate consistently over the past 11 quarters on the back of growth in revenues as well as strong margins. We expect the trend to have continued in the to-be-reported quarter as well. Particularly, Marriott’s increased scale and a robust development pipeline post Starwood purchase is likely to bolster the top line in the first-quarter.

Moreover, increasing business and leisure travel on the back of improving economic indicators and positive employment numbers along with higher transaction volumes should further boost performance. In fact, its rising North American business and large international exposure are also expected to drive growth. Further, investments in technology for hotel bookings are likely to improve guest experience, which in turn is anticipated to boost occupancy.

For the first quarter, earnings per share are estimated between 87 cents and 91 cents. Meanwhile, comparable system-wide revenue per available room (RevPAR) is expected to increase in the range of 1–3% on a constant dollar basis in North America and worldwide. Outside North America, the company projects the same to inch up in the 1–2% band.

However, lingering global uncertainty in some key operating regions is likely to limit revenue growth. Also, various macro concerns in the Middle East along with heightened competition in the domestic market are expected to mar first-quarter RevPAR. Additionally, the company has been witnessing fewer international guests at its U.S. hotels over the past few quarters, given the stronger dollar. This may continue to hurt revenues and profits in the to-be-reported quarter.

Other Stocks to Consider

Marriott is not the only company looking up this earnings season. Here are some other companies to consider as our model shows that they also have the right combination of elements to post an earnings beat this quarter:

Playa Hotels & Resorts N.V. PLYA has an Earnings ESP of +9.68% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Red Lion Hotels Corporation RLH has an Earnings ESP of +3.33% and a Zacks Rank #3.

Norwegian Cruise Line Holdings Ltd. NCLH has an Earnings ESP of +2.70% and a Zacks Rank #3.

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