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Marriott (MAR) Tops Q1 Earnings, Lifts '17 View, Stock Up

Zacks Equity Research

Shares of Marriott International Inc. MAR rose nearly 5% in after-hour trading on May 8, after the company reported better-than-expected first-quarter 2017 results.

We note that on Sep 23, 2016, Marriott completed its acquisition of Starwood Hotels & Resorts Worldwide Inc. and became the world's largest hotel company.

Earnings and Revenue Discussion

Adjusted earnings per share (EPS) of $1.01 per share beat the Zacks Consensus Estimate of 90 cents by 12.2%. Moreover, the figure witnessed a 38.4% increase from combined adjusted EPS of 73 cents in the year-ago quarter. Also, earnings came in above management’s guided range of 87 cents to 91 cents.

Combined first-quarter 2016 results assume Marriott's acquisition of Starwood and Starwood's sale of its timeshare business completed on Jan 1, 2015 and some other adjustments.

Total revenue remained almost flat year over year at $5.56 billion but topped the Zacks Consensus Estimate of $4.91 billion by 13.3%.

Excluding the impact of Marriott's acquisition of Starwood and Starwood's sale of its timeshare business on first-quarter 2016 results, revenues this quarter surged 47.4% year over year. This reflects the positive impact of Starwood acquisition on first-quarter 2017 revenues.

RevPAR & Margins

In the first quarter, revenue per available room (RevPAR) for worldwide comparable system-wide properties increased 3.1% in constant dollar (up 2.7% in actual dollars), driven by 1.7% growth in occupancy and 0.6% rise in average daily rate (ADR). The figure also came in above management’s guided range of an increase of 1–3% on a constant dollar basis.

Comparable system-wide RevPAR in North America grew 3.1% in constant dollars (up 3.2% in actual dollars). Both occupancy rate and ADR witnessed a rise of 1% and 1.7%, respectively. Also, the figure came in above management’s guided range of a rise of 1–3% on a constant dollar basis.

In constant dollar, international comparable system-wide RevPAR rose 3.2% (up 1.4% in actual dollars) in the first quarter of 2017. Though occupancy rate increased 3.4%, ADR witnessed a decline of 2%. Management had expected the same to inch up in the 1–2% band for the quarter.

Notably, RevPAR surpassed the company’s expectations in North America and Europe given stronger group attendance and higher-rated business transient demand. In fact, demand in Greater China and elsewhere in the Asia Pacific region was also better than anticipated.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) was $750 million, up 10% year over year.

Worldwide comparable company-operated house profit margin increased 100 basis points (bps) in the first quarter, attributable to improved productivity and food and beverage margins. Also, North American comparable company-operated house profit margins increased 100 bps. Meanwhile, house profit margins for comparable company-operated properties outside North America rose 90 bps.

Total adjusted expenses decreased 2% year over year to $4.98 billion, mainly due to lower general, administrative and other costs.

General, administrative, and other expenses were $210 million, down 14.6% from the year-ago quarter, primarily on the back of general administrative cost savings. Notably, the figure was also below management’s expected range of $225 million to $230 million.

Second-Quarter 2017 Outlook

Marriott's outlook for the second quarter and full-year 2017 is for the combined company and does not include merger-related costs.

For the second quarter, earnings per share are estimated between 99 cents and $1.03. Also, the Zacks Consensus Estimate of $1.01 is pegged within the guided range.

Marriott projects comparable system-wide RevPAR to be flat to up 2% in North America on a constant dollar basis. Meanwhile, RevPAR for worldwide comparable system-wide properties is projected to inch up in the range of 1% to 3%. Outside North America, the company expects the same to increase in the 3% to 5% band.

Notably, the company's RevPAR guidance for the second quarter reflects the unfavorable shift of Easter into the same period.

Moreover, the company expects fee revenues between $820 million and $835 million. Operating income is projected in the range of $620–$640 million while general, administrative and other expenses are anticipated between $220 million to $225 million.

2017 View Lifted

For full-year 2017, Marriott now anticipates earnings in the band of $3.92– to $4.09 per share, up from the earlier guided range of $3.79–$3.97. The Zacks Consensus Estimate for 2017 is pegged at $3.92.

The company also increased its full-year 2017 RevPAR expectations on the back of stronger-than-expected RevPAR performance in North America in the first quarter and improving demand trends in the Europe and Asia-Pacific regions.

Marriott expects comparable system-wide RevPAR to increase 1–3% in North America (earlier flat to up 2%), climb 2–4% outside North America (earlier 1–3% rise) and inch up 1–3% worldwide (earlier 0.5–2.5% increase), on a constant dollar basis.

Additionally, the company projects fee revenues between $3,225 million to $3,295 million (earlier $3,175–$3,245 million). The increase reflects better-than-expected fees in the first quarter as well as higher comparable system-wide RevPAR expectations on a constant dollar basis, for the full year.  

Operating income is anticipated in the range of $2,405 million to $2,495 million (earlier $2,335–$2,430 million), while adjusted EBITDA is projected to be between $3,100 million and $3,195 million (earlier $3,075–$3,175 million). Also, general, administrative and other expenses are expected to be in the band of $880 million to $890 million (earlier $895–$905 million), given lower-than-expected expenses in the first quarter.

Marriott presently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Marriott International Price, Consensus and EPS Surprise

 

Marriott International Price, Consensus and EPS Surprise | Marriott International Quote

Peer Releases

Wyndham Worldwide Corporation WYN reported first-quarter adjusted earnings per share of $1.14, beating the Zacks Consensus Estimate of $1.11 by 2.7%. Moreover, earnings were up 1.8% year over year on the back of the company’s share repurchase program.

In first-quarter 2017, Hyatt Hotels Corporation H posted adjusted earnings of 73 cents per share that outpaced the Zacks Consensus Estimate of 24 cents by a whopping 204.2%. Further, earnings increased significantly from the year-ago figure of 25 cents mainly due to higher revenues.

Extended Stay America, Inc.’s STAY first-quarter 2017 adjusted earnings of 15 cents per share surpassed the Zacks Consensus Estimate of 12 cents by 25% and increased 15.4% year over year owing to higher revenues.

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