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Marriott Beats, Outlook Strong

Zacks Equity Research

Marriott International Inc. (MAR) posted fourth quarter 2012 earnings of 56 cents per share, surpassing the Zacks Consensus Estimate by a penny and the year-ago quarter’s adjusted earnings of 46 cents per share. The earnings were in line with the higher end of the company’s projected guidance of 52 cents to 56 cents per share. In the full year of 2012, adjusted earnings were $1.64 versus the prior year’s adjusted earnings of $1.31 cents per share.

Total revenues in the fourth quarter were $3.8 billion, up 10.5% from the year earlier quarter’s adjusted revenues and also ahead of the Zacks Consensus Estimate of $3.6 billion. In 2012, revenues were $11.8 billion versus the prior year’s adjusted revenues of nearly $11.0 billion.

Inside the Headline Numbers

In the fourth quarter, base management and franchise fees increased 7% year over year to $369 million. The rise can be attributed to higher revenue per available room (RevPAR) incurred in the company’s hotels and fees gained from the newly launched hotels. Incentive management fees were $90 million, up 22% from the year-ago quarter, benefiting from the previously deferred fees. Owned, leased, corporate housing and other revenues dropped 13% to $308 million.

In the quarter, RevPAR for worldwide comparable system-wide properties grew 5.2%. International comparable system-wide REVPAR climbed up 3.2% annually with the rise in average daily rate of 0.5%.

Comparable system-wide RevPAR in North America rose 5.9%, with the average daily rate up 4.0%. Comparable systemwide North American full-service and luxury hotels’ RevPAR escalated 5.7%, driven by a 3.4% surge in average daily rate. RevPAR for comparable systemwide North American limited service hotels grew 6.0%, driven by a 4.4% upside in average daily rate.

Adjusted operating margin in the quarter were 40% versus 33% in the prior year quarter.

Update on Hotel Rooms

During the quarter, Marriott included 37 properties with 13,982 guestrooms and divested 6 properties. At the end of the fourth quarter, lodging group and timeshare resorts at Marriott’s owned 3,801 and 660,000 properties, respectively. In 2012, the company included 27,000 rooms in its system; 30% of which is located in the international markets.

Nearly 800 properties with over 130,000 rooms are either under development or already under construction or undergoing conversion from other brands.


At the end of the fourth quarter, total debt was $2,935.0 million versus $2,509 million in the third quarter while cash balances totaled $88 million compared with $105 million in the prior quarter.

In the reported quarter, the company repurchased 6.9 million shares for $257 million. In 2012, the company bought back 31.2 million shares worth $1.2 billion. Recently, the company has raised its share repurchase authorization to 34.2 million.


For the first quarter of 2013, total fee revenue will be between $355 million and $370 million and earnings per share between 37 cents and 42 cents.

The company estimates that North American comparable system-wide REVPAR will witness an increase of 4% to 7% whereas comparable system-wide REVPAR outside North America will be 2% to 4% and 3% to 6% worldwide in the first quarter.

The company projects operating income to be within the range of $205 million to $230 million and operating profit in the quarter to be within $205 million and $230 million, up $30 million to $55 million year over year.

For full year 2013, the company projects comparable system-wide REVPAR will increase 4% to 7% in North America whereas 3% to 5% and 4% to 7% outside North America and worldwide, respectively, on a constant dollar basis.

The company forecasts fee revenues to be within $1,525 million and $1,575 million, up nearly 7% to 11% year over year. Operating income will be within the range of $985 million and $1,055 million. Earnings per share for 2013 are expected from $1.90 to $2.05.

Our Take

The company reported impressive results in the quarter on the back of a strong pipeline, significant international exposure, buyback strategy, lower operating cost structure and increased market share. Marriott’s deal to manage Gaylord also remains strategically sound. The company’s lodging business in domestic market is constantly growing.

However, in the near term, we remain cautious on the stock owing to the uncertain economic environment.

Marriott currently retains a Zacks Rank #3 (Hold). Another hotel company Wyndham Worldwide Corporation (WYN) recently declared its fourth quarter 2012 adjusted earnings of 63 cents per share, ahead of the Zacks Consensus Estimate of 60 cents per share and up 34% year over year. Wyndham currently carries a Zacks Rank #2 (Buy).

There are various other hoteliers who are also trying to expand their businesses further, including The Marcus Corporation (MCS) and Choice Hotels International Inc. (CHH) which carry a Zacks Rank #1 (Strong Buy) and a Zacks Rank #2 (Buy), respectively.

Read the Full Research Report on MAR

Read the Full Research Report on CHH

Read the Full Research Report on MCS

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