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Marriott (MAR) Tops on Q4 Earnings, Revenues; Gives '17 View

Zacks Equity Research

Marriott International Inc. MAR posted better-than-expected fourth-quarter 2016 results with both earnings and revenues surpassing the Zacks Consensus Estimate. Shares of the company jumped slightly in after-hour trading on Feb 15, following the 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 85 cents per share beat the Zacks Consensus Estimate of 83 cents by 2.4%. Moreover, the figure witnessed a 19.7% increase from combined adjusted EPS of 71 cents in the year-ago quarter.

Combined fourth-quarter 2015 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 decreased 2.1% year over year to $5.46 billion, but topped the Zacks Consensus Estimate of $4.82 billion by 13.1%.

Excluding the impact of Marriott's acquisition of Starwood and Starwood's sale of its timeshare business on fourth-quarter 2015 results, revenues this quarter increased a significant 47.2% year over year. This reflects the positive impact of Starwood acquisition on fourth-quarter 2016 revenues

RevPAR & Margins

Increase in demand and occupancy rate led to revenue per available room (RevPAR) growth. In the fourth quarter, RevPAR for worldwide comparable system-wide properties grew 0.8% in constant dollar (up 0.3% in actual dollars), driven by a 0.3% rise in average daily rate (ADR) and 0.4% growth in occupancy. The figure was within the management’s guided range of flat to up 1%.

Comparable system-wide RevPAR in North America grew 1.1% both in constant and actual dollars. Though occupancy rate dipped 0.1%, ADR witnessed a rise of 1.3%. The figure came above the management’s guided range of flat to up 1%.

In constant dollar, international comparable system-wide RevPAR inched up 0.2% (down 1.4% in actual dollars) in the fourth quarter of 2016. Though occupancy rate increased 1.5%, ADR witnessed a decline of 1.9%. Management had expected flat growth for the quarter.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) was $756 million, up 10.9% year over year, supported by revenue growth.

Worldwide comparable company-operated house profit margin increased 30 basis points (bps) in the fourth quarter, attributable to improved productivity and lower utility costs. Also, North American comparable company-operated house profit margins increased 50 bps. Meanwhile, house profit margins for comparable company-operated properties outside North America remained flat.

Total expenses increased 47.7% year over year to $5.02 billion mainly due to higher reimbursement costs, merger-related costs and charges as well as general, administrative and other costs.

General, administrative, and other expenses were $234 million, down 17.6% from the year-ago quarter. Expenses decreased largely due to lower administrative costs, favorable legal settlement and net foreign exchange gains. Notably, the figure was also below the management’s expected range of $235 million to $240 million.
 

Marriott International Price, Consensus and EPS Surprise

 

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

2016 Results

Marriott’s full-year adjusted earnings of $3.30 failed to surpass the Zacks Consensus Estimate of $3.55 by 7%. However, it increased 16.2% from the year-ago quarter figure of $2.84.

Full-year revenues of $22.48 billion topped the Zacks Consensus Estimate of $16.34 billion by 37.6% and inched up 2.5% year over year.

First-Quarter 2017 Outlook

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

For the first quarter, EPS is estimated between 87 cents and 91 cents. The Zacks Consensus Estimate of 93 cents is above the guided range.

Marriott expects comparable system-wide RevPAR to increase in the range of 1–3% on a constant dollar basis in North America and worldwide. Outside North America, the company expects the same to inch up in the 1–2% band.

Notably, the company's RevPAR guidance for the first quarter reflects the benefit of the U.S. Presidential inauguration and associated events at Washington, D. C. hotels as well as the favorable shift of Easter into the second quarter.

Furthermore, on one hand while the company expects fee revenues between $740 million and $750 million, while operating income is expected in the range of $500–$525 million. On the other hand, general, administrative and other expenses are expected between $225 million to $230 million.

2017 View

For full-year 2017, Marriott EPS in the range of $3.79--$3.97. The Zacks Consensus Estimate of $4.02 is above the guided range.

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

Moreover, the company expects fee revenues between $3,175 million and $3,245 million. Operating income is expected in the range of $2,335--$2,430 million, while adjusted EBITDA is projected to be between $3,075 million and $3,175 million. In addition, general, administrative and other expenses are expected to be in the band of $895–$905 million.

Also, the company anticipates net room additions of 6% in 2017.

Zacks Rank & Stocks to Consider

Marriott presently has a Zacks Rank #3 (Hold). Better-ranked stocks in this sector include Intrawest Resorts Holdings, Inc. SNOW, Belmond Ltd. BEL and Choice Hotels International, Inc. CHH. While Intrawest Resorts Holdings sports a Zacks Rank #1 (Strong Buy), Belmond and Choice Hotels International carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank(Strong Buy) stocks here.

The Zacks Consensus Estimate for Intrawest Resorts Holdings’ fiscal 2017 earnings climbed nearly 26% over the past 60 days. Moreover, the trailing four-quarter average earnings surprise is a positive 8.71%.

Belmond posted positive earnings surprise in three of the last four quarters, with an average beat of 108.63%. Additionally, for 2016, EPS is expected to improve 66.7%.

Choice Hotels International’s earnings surpassed the Zacks Consensus Estimate in three of the last four quarters, with an average beat of 2.67%. Further, for 2016, EPS is expected to grow 9.9%.

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