A month has gone by since the last earnings report for Marriot Vacations Worldwide Corporation (VAC). Shares have added about 4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Marriot Vacations Worldwide Corporation due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Marriott Vacations Q3 Earnings Miss Estimates, Up Y/Y
Marriott Vacations Worldwide Corporation reported mixed results for the third quarter of 2019, with earnings missing the Zacks Consensus Estimate and revenues beating the same.
Adjusted earnings of $1.97 per share missed the consensus mark of $2.04 by 3.4% but increased 38.7% year over year.
Quarterly revenues were $1,139 million, which beat the Zacks Consensus Estimate of $1,127 million by 1.1% and surged 51.9% from the year-ago quarter’s figure. The upside can be attributed to improvement in consolidated vacation ownership contract sales.
Vacation Ownership: Consolidated Vacation Ownership contract sales totaled $390 million, up 40% year over year on a combined basis. Revenues, excluding cost reimbursements, increased 4% year over year. Consolidated contract sales rose nearly 5% on a year-over-year basis. Contract sales in the quarter were affected by $7 million due to a hurricane. Legacy-MVW contract sales amounted to $244 million, up 1% year over year. Legacy-MVW North America volume per guest (“VPG”) amounted to $3,789 million, almost flat year over year.
Rental revenues in the third quarter were $135 million, up nearly 57% from year-ago quarter’s figure.
On a combined basis, the segment’s adjusted EBITDA increased 11% year over year to $195 million in the third quarter. Adjusted EBITDA margin improved 180 basis points from the year-ago quarter’s figure, excluding cost reimbursements.
Exchange & Third-Party Management: The segment’s revenues totaled $112 million in the quarter, up from year-ago quarter’s figure of $40 million. Total Interval Network active members were 1.7 million at the end of the quarter and average revenue per member was $40.89.
The segment’s adjusted EBITDA, on a combined basis, was $56 million. The figure declined 7% year over year (after excluding VRI Europe from year-ago quarter’s level).
Corporate and Other results
The segment - which primarily consist of general and administrative costs, decreased $19 million year over year, owing to synergy savings and lower compensation related expenses, partially offset by normal inflationary cost increases.
Expenses & EBITDA
Total expenses in the quarter amounted to $1,069 million, up 53.2% year over year. Rise in expenses were caused by an increase in the cost of vacation ownership products as well as high rental, financing and administrative costs. Higher marketing and sales expenses along with management and exchange costs affected total costs. The company’s adjusted EBITDA in the third quarter was $190 million, which surged 90% from the year-ago quarter’s level.
Cash and cash equivalents, as of Sep 30, 2019, was $183 million compared with $231 million as of 2018 end. Inventory declined to $840 million from $863 million at 2018-end. The company had $4 billion in debt outstanding (net of unamortized debt issuance costs) at the end of the third quarter.
During the reported quarter, the company’s properties in the Vacation Ownership segment were adversely impacted by a hurricane. The company undertook mandatory evacuations, shut resort and sales center, and cancel reservations and scheduled tours.
For 2019, the company expects adjusted earnings of $7.67-$8.16 per share, up from the previous guidance of $7.65-$8.14. The Zacks Consensus Estimate for earnings is pegged at $7.68 for the year. Adjusted EBITDA is projected between $745 million and $775 million, compared with previous expectation of $750-$780 million.
Consolidated contract sales growth is likely to be in the range of 5-8% in 2019. Adjusted free cash flow is anticipated in the range of $440-$490 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 5.7% due to these changes.
At this time, Marriot Vacations Worldwide Corporation has a strong Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Marriot Vacations Worldwide Corporation has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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