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Marriott Vacations (VAC) Q1 Earnings & Revenues Lag Estimates

Zacks Equity Research

Marriott Vacations Worldwide Corporation VAC reported lower-than-expected first-quarter 2019 results, after beating the estimates in the preceding quarter. Adjusted earnings of $1.45 per share missed the Zacks Consensus Estimate of $1.69. However, the bottom line increased 4.3% year over year.

Quarterly revenues came in at $1,060 million, which lagged the consensus estimate of $1,076 million but increased 85.6% from the year-ago quarter. The upside can be attributed to revenue growth across segments.

The company is currently in the process of integrating and transforming the business, which is likely to drive additional growth opportunities.

Segmental Performances

Marriott Vacations’ business is operated under two major segments — Vacation Ownership (94.6% of total revenues in 2018) and Exchange & Third-Party Management (5.4%).

Vacation Ownership

Consolidated Vacation Ownership contract sales totaled $354 million, reflecting a 74% increase year over year. While Legacy-MVW contract sales amounted to $223 million, up 10% year over year, Legacy-MVW North America VPG sales increased 1% to $3,777.

Rental revenues in the first quarter were $147 million, up 98% from the first quarter of 2018. Rental revenues, net of expenses, summed $45 million, up 4% year over year.

Financing revenues increased 89% in the first quarter to $67 million. Financing revenues, net of expenses and consumer financing interest expenses, were $45 million, marking a 12% increase from the first quarter of 2018.

For resort management and other services, revenues increased 79% year over year in the quarter under review and came in at $125 million. Less of expenses, resort management revenues increased 5% to $59 million.

Exchange & Third-Party Management

Management and exchange revenues totaled $124 million in the quarter. Total Interval Network active members were 1.7 million at the end of quarter and average revenue per member was $46.24.

Marriot Vacations Worldwide Corporation Price, Consensus and EPS Surprise

Marriot Vacations Worldwide Corporation Price, Consensus and EPS Surprise | Marriot Vacations Worldwide Corporation Quote

Expenses & EBITDA

Total expenses in the first quarter amounted to $969 million, up 87.1% year over year. The surge in expenses was mainly due to an increase in the cost of vacation ownership products as well as high rental, financing and administrative costs. Increased marketing and sales expenses along with management and exchange costs affected total costs. The company’s adjusted EBITDA in the first quarter of 2019 was $166 million, marking a whopping 163.5% increase from the year-ago quarter.

Balance Sheet

Cash and cash equivalents, as of Mar 31, 2019, was $222 million compared with $231 million as of 2018 end. Inventory increased to $910 million from $863 million by 2018 end.

2019 Outlook

For 2019, the company expects adjusted earnings of $7.33-$7.94 per share. The Zacks Consensus Estimate for full-year earnings is pegged at $7.78, above the midpoint of the company’s guided range.

Consolidated contract sales for the year is expected to be in the $1,530-$1,600 million range. Adjusted EBITDA is projected to be between $745 million and $785 million.

Zacks Rank & Key Picks

Marriott Vacations has a Zacks Rank #3 (Hold). Better-ranked stocks worth considering in the same space include Huazhu Group Limited HTHT, Red Lion Hotels Corporation RLH and Wyndham Destinations, Inc. WYND. While Huazhu Group sports a Zacks Rank #1 (Strong Buy), Red Lion Hotels and Wyndham Destinations carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Huazhu Group Limited, which was previously known as China Lodging Group Limited, has an impressive long-term earnings growth rate of 20.9%.

Red Lion Hotels’ bottom line for the current year is likely to increase 93.3%.

Wyndham Destinations reported better-than-expected earnings in all of the trailing four quarters, the average being 5.9%.

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