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It has been about a month since the last earnings report for Marriott International (MAR). Shares have added about 7.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Marriott 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 Q2 Earnings Miss Estimates, Revenues Surpass
Marriott reported second-quarter 2020 results, with earnings missing the Zacks Consensus Estimate and revenues surpassing the same. However, the top and the bottom line declined on a year-over-year basis.
In the quarter under review, Marriott’s adjusted loss per share came in at 64 cents, wider than the Zacks Consensus Estimate of a loss of 44 cents. In the prior-year quarter, the company reported adjusted earnings of $1.56 per share. Adjusted loss in the quarter included impairment charges and bad debt expense of 19 cents and 17 cents per share, respectively, thanks to the coronavirus pandemic.
Quarterly revenues of $1,464 million beat the consensus mark of $1,392 million by 5.2%. However, the top line declined 72% on a year-over-year basis. Base management and Franchise fee came in at $40 million and $182 million, down 87% and 65% year over year, respectively.
RevPAR & Margins
In the quarter under review, revenue per available room (RevPAR) for worldwide comparable system-wide properties fell 84.4% in constant dollars (down 84.6% in actual dollars) due to 57.4% and 35.3% decline in occupancy and average daily rate (ADR), respectively. These metrics were impacted by the coronavirus pandemic.
Comparable system-wide RevPAR in North America fell 83.6% in constant dollars (down 83.6% in actual dollars) thanks to 34.7% decline in ADR and 58.4% fall in occupancy.
On a constant-dollar basis, international comparable system-wide RevPAR slumped 86.7% (down 87.1% in actual dollars) due to a 54.9% and 37.7% decline in occupancy and ADR, respectively.
Total expenses fell 67% year over year to $1,618 million, primarily due to decline in Reimbursed expenses.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) amounted to $61 million, down 94% year over year.
At the end of the second quarter, Marriott's total debt was reported at $11.8 billion, compared with $10.9 billion in Dec 2019.
During the quarter, the company’s cash balances totaled $2.3 billion compared with $225 million in Dec 2019.
Owing to uncertainty revolving around the crisis, the company temporarily suspended its share repurchase programs and dividend payouts.
At the end of the second-quarter 2020, Marriott's development pipeline totaled nearly 3,000 hotels, with approximately 510,000 rooms. Further, nearly 230,000 rooms were under construction.
The coronavirus outbreak will hurt the company’s results in 2020. However, the company is unable to estimate any financial impact of the coronavirus outbreak at the moment as the duration and extent of the outbreak cannot be ascertained.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -193.33% due to these changes.
At this time, Marriott has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Marriott has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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