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Why Is Marriott (VAC) Down 2.4% Since Last Earnings Report?

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It has been about a month since the last earnings report for Marriott Vacations Worldwide (VAC). Shares have lost about 2.4% 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 Vacations  Q1 Earnings & Revenues Lag Estimates

Marriott Vacations reported dismal first-quarter 2021 results, wherein both earnings and revenues not only missed the Zacks Consensus Estimate but also declined sharply year over year.

Stephen P. Weisz, CEO said “Our results this quarter are evidence of the continued recovery in our business and the resiliency of our business model. We generated $226 million in contract sales in the first quarter, a 27% sequential increase, and currently expect contract sales to increase to $320 million to $340 million in the second quarter.

Q1 Earnings and Revenues

The company reported adjusted loss per share of 49 cents in the quarter under review, wider than the Zacks Consensus Estimate of a loss of 29 cent. In the year-ago quarter, the company had reported adjusted earnings of $1.71 per share.

Total revenues of $759 million missed the consensus mark of $786 million by 3.5%. Moreover, the top line declined 24.9% on a year-over-year basis.

Segmental Performances

Vacation Ownership: During the first quarter, the segment’s revenues declined 27.2% year over year to $661 million compared with $908 million in the prior-year quarter. Revenues, excluding cost reimbursements fell 30% year over year. However, the figure improved 14% compared with fourth-quarter 2020. Moreover, in the first quarter, revenues from sale of vacation ownership products, rentals, and management and exchange increased 19%, 29%, and 5%, respectively, quarter over quarter.

The segment’s adjusted EBITDA came in at $68 million compared with $147 million in the prior-year quarter.

Exchange & Third-Party Management: The segment’s revenues totaled $86 million in the first quarter, down 19.6% from $107 million in the prior-year quarter. The downside was primarily due to reduced exchange and rental transactions as well as lower management fees on account of the coronavirus pandemic.

During the first quarter, total Interval Network active members declined 3% (compared with the previous quarter’s levels) to 1.5 million, while interval International average revenue per member rose 14% to $47.13. The segment’s adjusted EBITDA amounted to $41 million, flat year over year.

Corporate and Other results

During the first quarter, General and administrative costs declined $24 million year over year, courtesy of synergy savings, lower costs related to the furlough and reduced work week programs.

Expenses & EBITDA

Total expenses in the quarter declined 30.3% year over year to $739 million compared with $1060 million reported in the year-ago quarter.

The company’s adjusted EBITDA in the first quarter amounted to $69 million compared with $138 million reported in the year-ago quarter.

Balance Sheet

As of Mar 31, 2021, cash and cash equivalents were $643 million compared with $524 million as of Dec 31, 2020.

The company had $4.4 billion in debt outstanding (net of unamortized debt issuance costs) at the end of the first quarter, up $0.1 billion from 2020-end. This includes $3 billion of corporate debt and $1.4 billion of non-recourse debt related to its securitized notes receivable.

Due to uncertainties related to the pandemic, the company temporarily suspended its share repurchases and dividend payouts.

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 -22.42% due to these changes.

VGM Scores

At this time, Marriott has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. 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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