Marriott International (MAR) Down 0.1% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Marriott International (MAR). Shares have lost about 0.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Marriott International due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Marriott Q4 Earnings Beat, Revenues Miss Estimates

Marriott reported mixed fourth-quarter 2018 results, wherein earnings surpassed the Zacks Consensus Estimate but revenues lagged the same.

Adjusted earnings of $1.44 per share surpassed the Zacks Consensus Estimate of $1.40 and increased 32% year over year. Total revenues came in at $5,289 million, which missed the consensus mark of $5,607 million. However, the top line inched up 0.7% from the year-ago quarter’s figure.

RevPAR & Margins

In the quarter under review, RevPAR for worldwide comparable system-wide properties increased 1.3% in constant dollars (up 0.1% in actual dollars) driven by a 2.2% improvement in average daily rate (ADR), partially offset by a 0.7% fall in occupancy.

Comparable system-wide RevPAR in North America grew 0.2% in constant dollars (up flat in actual dollars) owing to 1.9% gain in ADR, partially overshadowed by a 1.2% decline in occupancy.

On a constant-dollar basis, international comparable system-wide RevPAR rose 4% (up 0.3% in actual dollars). Both occupancy rate and ADR improved 0.7% and 3%, respectively.

Meanwhile, worldwide comparable company-operated house profit margins were flat as robust cost control and synergies from the Starwood acquisition were overshadowed by marginal growth in RevPAR and higher wages.

Further, North American comparable company-operated house profit margins contracted 20 basis points (bps). On the flip side, house profit margins for comparable company-operated properties outside North America expanded 20 bps.

Total expenses were up 1% year over year to $4.9 billion mainly due to higher reimbursed expenses as well as merger-related costs and charges. However, Owned, leased, and other expenses declined in the quarter under review.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were $864 million, up 10% year over year.

First-Quarter 2019 Outlook

For the first quarter of 2019, the company expects comparable system-wide RevPAR to increase in the range of 1-2% in North America in constant currency. Marriott anticipates the same to rise 2-4% outside North America and approximately 1-3% worldwide.

Furthermore, gross fee revenues are projected between $885 million and $905 million, up 5-7% on a year-over-year basis. Operating income is anticipated between $645 million and $670 million.

General, administrative, and other expenses are expected to be $215-$220 million. Adjusted EBITDA is anticipated to be $820-$845 million, up 6-10% year over year. Earnings per share are envisioned in the $1.30-$1.35 band compared with adjusted earnings of $1.34 in first-quarter 2018. The Zacks Consensus Estimate is pegged at $1.31.

2019 View

For 2019, Marriott anticipates earnings of $5.87-$6.10 per share compared with $6.21 reported in the prior year. The Zacks Consensus Estimate for 2019 is pegged at $6.16. The company expects gross fee revenues between $3,830 million and $3,910 million, up 5-7% from the year-ago period.

Comparable system-wide RevPAR is expected to increase in the range of 1-3% in North America, 2-4% outside North America and 1-3% worldwide. Marriot expects room additions of nearly 5.5% in 2019, which comprises deletions of 1-1.5%.

Operating income is envisioned to be $2,915-$3,015 million. General, administrative and other expenses are anticipated to be $910-$920 million. Adjusted EBITDA is projected in the band of $3,615-$3,715 million, up 4-7% from 2018.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

Currently, Marriott International has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Marriott International has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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