Marriott Vacations (VAC) Falls 25% in 6 Months: What Ails It?
Are you still holding shares of Marriott Vacations Worldwide Corporation VAC and waiting for a miracle to take the stock higher in the near term? If yes, then you might lose more money as chances are very slim that the stock, which has lost its value by 25.1% in the past six months, will take a U-turn in the upcoming period. During the same time frame, the Zacks Hotels and Motels industry grew 10.4%.
VAC’s 2023 earnings is estimated to witness a year-over-year decline of 4.4%. In the past 30 days, earnings estimate has recorded downward revision of 4% to $9.81 per share.
Let’s delve deeper into the factors that are affecting this Zacks Rank #5 (Strong Sell) company.
Primary Concerns
The company’s growth is hindered by dismal contract sales due to a notable decline in volumes per guest (VPG), especially in legacy-Vistana sites. The hospitality industry is cyclical and worsening global economic conditions might dent Marriott Vacations’ revenues and profits. Consumer demand for services is closely linked to the performance of general economy, and is sensitive to business and personal discretionary spending levels.
Despite cost synergies from the ILG acquisition, VAC has been bearing the brunt of steep expenses. During second-quarter 2023, total expenses rose 4.8% year over year to $1,003 million from $957 million reported in the year-ago quarter. Escalated marketing and sales expenses, and rental costs affected total expenditures. Management anticipates inflationary environment to affect margins for some time.
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Dismal contract sales remain a major concern. During the second quarter of 2023, contract sales dipped 10% year over year to $453 million. The downside was caused by larger-than-expected VPG declines, particularly at the legacy-Vistana sites. Attributes such as continued transition to Abound by Marriott Vacations program and the integration of Hyatt and legacy-Welk business models and sales processes added to the downside.
For 2023, VAC expects contract sales to be between $1.84 billion and $1.9 billion, down approximately 5% from the previous guidance. Although Management envisions sequential improvements in VPG, it is likely to decline on a year-over-year basis.
Stocks to Consider
Some better-ranked stocks in the Zacks Consumer Discretionary sector are:
Royal Caribbean Cruises Ltd. RCL currently sports a Zacks Rank #1 (Strong Buy). RCL has a trailing four-quarter earnings surprise of 28.5% on average. Shares of RCL have surged 91.6% in the past year. You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for RCL’s 2023 sales and EPS indicates rises of 54.5% and 180.3%, respectively, from the year-ago period’s reported levels.
Skechers U.S.A., Inc. SKX flaunts a Zacks Rank #1 at present. It has a trailing four-quarter earnings surprise of 39.1% on average. Shares of SKX have increased 30.4% in the past year.
The Zacks Consensus Estimate for SKX’s 2023 sales and EPS suggests growth of 8.7% and 42%, respectively, from the year-ago period’s levels.
OneSpaWorld Holdings Limited OSW currently carries a Zacks Rank #2 (Buy). OSW has a trailing four-quarter earnings surprise of 42.6% on average. Shares of OSW have gained 27% in the past year.
The Zacks Consensus Estimate for OSW’s 2023 sales and EPS implies improvements of 44.5% and 117.9%, respectively, from the year-ago period’s levels.
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Royal Caribbean Cruises Ltd. (RCL) : Free Stock Analysis Report
Skechers U.S.A., Inc. (SKX) : Free Stock Analysis Report
Marriot Vacations Worldwide Corporation (VAC) : Free Stock Analysis Report
OneSpaWorld Holdings Limited (OSW) : Free Stock Analysis Report
