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Leading hotelier Marriott International Inc.’s (MAR - Analyst Report) fourth-quarter 2013 earnings of 49 cents per share missed the Zacks Consensus Estimate of 50 cents by a penny. Also, earnings declined 12.5% year over year. The results reflect a year-over-year decline in top line. However, earnings were within management’s guidance range of 47 cents–50 cents per share.
Due to lower fees and other revenues resulting from fewer days in the fourth quarter of 2013 compared to last year, total revenue in the fourth quarter was $3.22 billion, down 14.3% year over year. Total revenue also missed the Zacks Consensus Estimate of $3.29 billion by nearly 2.2%.
Marriott shifted its fiscal calendar starting first-quarter 2013. The company’s fourth-quarter includes 92 days as compared with the year-ago period of 112 days. The company did not restate the prior-year results.
Revenues in Detail
In the fourth quarter, base management and franchise fees plunged 14.6% year over year to $315.0 million. The declined was due to the shift in Marriott’s fiscal calendar, which lowered quarterly revenues by $72 million. However, this negative impact was partially offset by higher revenue per available room (RevPAR) and non-room sales at existing hotels as well as fees from new hotels.
Incentive management fees also declined 18.9% year over year to $73.0 million. Shift in fiscal calendar year and tough year over year comparisons due to the absence of deferred fees that was received during fourth quarter 2012 led to the decline.
Owned, leased, corporate housing and other revenues, net of direct expenses, were down 10.7% year over year to $50.0 million due to the shift in fiscal calendar Very long
RevPAR & Margins
In the fourth quarter, RevPAR for worldwide comparable system-wide properties grew 4.3%, driven by a 3.1% rise in average daily rate (ADR). Comparable system-wide RevPAR in North America was up 4.7% and remained within management’s guidance range of 4.5% to 5.5% driven by a 3.3% rise in ADR. International comparable system-wide RevPAR climbed 3.2%.
Adjusted operating margin (cost reimbursement excluded) declined 360 basis points to 36.7% due to an increase in total expenses.
Update on Hotel Rooms
During the fourth quarter, 47 properties with 7,681 guestrooms were added to Marriot’s existing hotel portfolio. The company also divested fourteen properties. Currently, Marriott boasts as many as 3,916 lodging properties and timeshare resorts comprising a total of nearly 676,000 rooms. Nearly 1,165 properties with over 195,000 rooms are either under construction or undergoing conversion to the company’s brands. However, this does not include approximately 10,000 rooms associated with the Protea transaction.
Full-Year 2013 Highlights
In full-year 2013, adjusted earnings per share were $2.00, up 22.0% year over year and within management’s guidance of $1.98 to $2.01. However, it missed the Zacks Consensus Estimate of $2.01 by a penny. In 2013, revenues were $12.8 billion, up 8.0% year over year. However, it missed the Zacks Consensus Estimate by 0.06%.
First-Quarter 2014 Guidance
For first-quarter 2014, earnings per share are estimated to be within 47 cents to 52 cents. The Zacks Consensus Estimate of 51 cents lies within the guidance range.
Marriot’s total fee revenue is expected between $380.0 million and $395.0 million. This guidance reflects $5.0 million decline in fees related to the change in fiscal calendar.
The company expects both worldwide comparable system-wide RevPAR and comparable system-wide RevPAR in North America to increase in the range of 4.0% to 6.0% in first quarter of 2014. However, system-wide RevPAR is expected to increase in the range of 3.0% to 5.0% internationally.
The company expects its operating income within the range of $235.0 million–$255.0 million.
Full-Year 2014 Guidance
Marriott expects earnings in the range of $2.29 to $2.45, up 15.0% to 23.0% year over year. The Zacks Consensus Estimate of $2.36 is also within the guidance range. In 2014, the company expects total fee revenue in the range of $1,650.0 million to $1,700.0 million, up 7.0% to 10.0% year over year.
The company expects both worldwide comparable system-wide RevPAR and comparable system-wide RevPAR in North America to increase in the range of 4.0% to 6.0% in full year 2014. However, system-wide RevPAR is expected to increase in the range of 3.0% to 5.0% outside North America.
After surpassing our revenue expectations in the previous quarters of 2013, the company missed out on the top line this time around, primarily due to the shift in fiscal calendar.
This Zacks Rank #3 (Hold) company is progressing well on the back of a growing North American business, significant international exposure, an aggressive buyback strategy and increased market share. The strong group booking trend in North America is also a positive for the company.
Another leading hotelier Starwood Hotels & Resorts Worldwide Inc. (HOT - Analyst Report) recently posted mixed fourth-quarter 2013 results with earnings beating the Zacks Consensus Estimate but revenues missing the mark. On the other hand, Hyatt Hotels Corporation (H - Snapshot Report) posted strong results with earnings and revenue both beating the Zacks Consensus Estimate.
Another hospitality company Wyndham Worldwide Corporation (WYN - Analyst Report) recently posted mixed fourth-quarter 2013 results with earnings missing the Zacks Consensus Estimate but revenues beating the same.