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Marriott (MAR) Down 7.9% Since Last Earnings Report: Can It Rebound?

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  • MAR

It has been about a month since the last earnings report for Marriott International (MAR). Shares have lost about 7.9% 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 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 drivers.

Marriott Q3 Earnings Beat Estimates, Increase Y/Y

Marriott reported solid third-quarter 2021 results, with earnings and revenues beating the Zacks Consensus Estimate as well as increasing on a year-over-year basis.

During the quarter, the company witnessed solid demand in Europe owing to the opening of key international borders. It reported sequential improvements in revenue per available room (RevPAR), occupancy and average daily rate (ADR) on account of solid leisure demand. Although the Delta variant had negatively impacted business transient demand (during the second half of the quarter), demand is stated to have picked up in October. With global trends improving, the company expects the recovery momentum to continue in the upcoming periods as well.

Earnings & Revenues Discussion

In the quarter under review, Marriott’s adjusted earnings per share were 99 cents, which surpassed the Zacks Consensus Estimate of 97 cents. In the prior-year quarter, the company had reported adjusted earnings of 13 cents per share.

Quarterly revenues of $3,946 million surpassed the consensus mark of $3,468 million. Moreover, the top line surged 75% on a year-over-year basis. During the quarter, revenues from Base management and Franchise fee came in at $190 million and $533 million compared with $87 million and $279 million reported in the prior-year quarter.

RevPAR & Margins

In the quarter under review, RevPAR for worldwide comparable system-wide properties fell 25.8% (in constant dollars) compared with 2019 levels. The decline was primarily driven by a fall in occupancy and ADR. Occupancy and ADR declined 16.8% and 4.4%, respectively, from 2019 levels. These metrics were impacted by the coronavirus pandemic.

Comparable system-wide RevPAR in Asia Pacific (excluding China) fell 63.9% (in constant dollars) from 2019 levels. Notably, occupancy and ADR had fallen 37.9% and 26%, respectively, from 2019 levels. Comparable system-wide RevPAR in Greater China fell 27.4% from 2019 levels.

On a constant-dollar basis, international comparable system-wide RevPAR fell 40.7% compared with 2019 levels. Occupancy and ADR dropped 25.4% and 7.9%, respectively, from 2019 levels. Comparable system-wide RevPAR in Europe as well as Caribbean & Latin America declined 43.5% and 17.8%, respectively, from 2019 levels.

Total expenses during the quarter increased 69.9% year over year to $3,401 million, primarily owing to a rise in Reimbursed expenses.

During the third quarter, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) amounted to $683 million compared with $327 million in the prior-year quarter.

Balance sheet

At the end of the third quarter, Marriott's total debt amounted to $9 billion compared with $9.5 billion in the previous quarter.

Unit Developments

At the end of third-quarter 2021, Marriott's development pipeline totaled nearly 2,769 hotels, with approximately 477,000 rooms. Nearly 206,000 rooms were under construction.

During the quarter, the company added 114 new properties (17,456 rooms) to its worldwide lodging portfolio.

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 6.99% due to these changes.

VGM Scores

Currently, Marriott has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending downward for the stock, and the magnitude of these revisions looks promising. Notably, Marriott has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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