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Marriott Vacations (VAC) Up 24% YTD: More Room to Run?
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Shares of Marriott Vacations Worldwide Corporation (VAC - Free Report) have gained 23.7% year to date, compared with the industry’s rally of 18.6%. The company has been benefiting from strong occupancies (for most of its North America resorts) and solid contract sales. Focus on digitization initiatives bodes well. However, high expenses and coronavirus pandemic remain major concerns.
Growth Drivers
Marriott Vacations have been witnessing a sequential improvement in occupancy rates, thereby highlighting people’s willingness to go on vacations. During third-quarter 2021, the company reported sequential improvements in occupancy at its European locations. It also reported solid improvements in urban locations such as San Diego and Boston with occupancy rates coming in at approximately 85% and 95%, respectively. Going forward, much optimism prevails as the company noted increasing willingness among customers to resume travel. Meanwhile, owner and preview reservations for the first half of 2022 were up 10% from 2019 levels.
The Zacks Rank #3 (Hold) company continues to utilize technology to lower back-office costs and improve associates' experience by leveraging artificial intelligence to augment and automate many high-volume internal transactional processes. During the third of quarter 2021, the company’s Vacation Ownership business launched a new digital reservation technology to boost marketing efficiency and improve customer service. Also, the company is making good progress on the technology needed to link Marriott, Westin and Sheraton products into a single points-based offering by early 2022. Going forward, the company will increase the use of digital tools to strengthen its infrastructure, grow online package sales, enable self-service bookings, make real-time offerings to enhance the overall customer experience and drive back-office efficiencies.
Marriott Vacations has sufficient liquidity to temporarily survive the current scenario of unpredictability. As of Sep 30, 2021, cash and cash equivalents were $0.4 billion compared with $1.3 billion as of Jun 30, 2021. The company stated availability of funds under the Warehouse Credit Facility and the Revolving Corporate Credit Facility with a borrowing capacity of $600 million.
Image Source: Zacks Investment Research
Concerns
Given the widespread and profound nature of the business, Marriott Vacations suffered downfalls in occupancy, rentals and contract sales due to “stay-at-home” recommendations (or requirements), quarantines and reluctance of consumers to travel. Although sequential improvements (month over month) were noted (owing to the reopening of the majority of its sales centers, resorts, and other properties), contract sales are lagging behind pre-pandemic levels. The company anticipates sequential improvements to continue. However, uncertainty with respect to pandemic-induced implications remains a concern.
Despite cost synergies from the ILG acquisition, the company has been bearing the brunt of steep expenses. Despite limited operations in 2020 due to the pandemic, total expenses were $2,984 million compared with $3,801 million in 2019. During the third quarter of 2021, total expenses increased 33.1% year over year to $896 million from $673 million reported in the year-ago quarter. Escalated marketing and sales expenses along with management and exchange costs affected total costs. This along with a rise in wage costs added to the downside. Going forward, costs are likely to rise due to the coronavirus impact.
Key Picks
Some better-ranked stocks in the Consumer Discretionary sector include Hilton Grand Vacations Inc. (HGV - Free Report) , Bluegreen Vacations Holding Corporation and Century Casinos, Inc. (CNTY - Free Report) .
Hilton Grand Vacations sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of 411.1%, on average. Shares of the company have increased 66.9% so far this year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Hilton Grand Vacations’ current financial-year sales and earnings per share (EPS) suggests growth of 189.5% and 158.1%, respectively, from the year-ago period’s levels.
Bluegreen Vacations flaunts a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 695%, on average. Shares of the company have soared 158.7% so far this year.
The Zacks Consensus Estimate for Bluegreen Vacations’ current financial-year sales and EPS indicates a rise of 27.5% and 199.3%, respectively, from the year-ago period’s levels.
Century Casinos carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 758.9%, on average. Shares of the company have increased 99.4% so far this year.
The Zacks Consensus Estimate for Century Casinos’ current financial-year sales and EPS suggests an improvement of 26.9% and 146.6%, respectively, from the year-ago period’s levels.
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Marriott Vacations (VAC) Up 24% YTD: More Room to Run?
Shares of Marriott Vacations Worldwide Corporation (VAC - Free Report) have gained 23.7% year to date, compared with the industry’s rally of 18.6%. The company has been benefiting from strong occupancies (for most of its North America resorts) and solid contract sales. Focus on digitization initiatives bodes well. However, high expenses and coronavirus pandemic remain major concerns.
Growth Drivers
Marriott Vacations have been witnessing a sequential improvement in occupancy rates, thereby highlighting people’s willingness to go on vacations. During third-quarter 2021, the company reported sequential improvements in occupancy at its European locations. It also reported solid improvements in urban locations such as San Diego and Boston with occupancy rates coming in at approximately 85% and 95%, respectively.
Going forward, much optimism prevails as the company noted increasing willingness among customers to resume travel. Meanwhile, owner and preview reservations for the first half of 2022 were up 10% from 2019 levels.
The Zacks Rank #3 (Hold) company continues to utilize technology to lower back-office costs and improve associates' experience by leveraging artificial intelligence to augment and automate many high-volume internal transactional processes. During the third of quarter 2021, the company’s Vacation Ownership business launched a new digital reservation technology to boost marketing efficiency and improve customer service. Also, the company is making good progress on the technology needed to link Marriott, Westin and Sheraton products into a single points-based offering by early 2022. Going forward, the company will increase the use of digital tools to strengthen its infrastructure, grow online package sales, enable self-service bookings, make real-time offerings to enhance the overall customer experience and drive back-office efficiencies.
Marriott Vacations has sufficient liquidity to temporarily survive the current scenario of unpredictability. As of Sep 30, 2021, cash and cash equivalents were $0.4 billion compared with $1.3 billion as of Jun 30, 2021. The company stated availability of funds under the Warehouse Credit Facility and the Revolving Corporate Credit Facility with a borrowing capacity of $600 million.
Concerns
Given the widespread and profound nature of the business, Marriott Vacations suffered downfalls in occupancy, rentals and contract sales due to “stay-at-home” recommendations (or requirements), quarantines and reluctance of consumers to travel. Although sequential improvements (month over month) were noted (owing to the reopening of the majority of its sales centers, resorts, and other properties), contract sales are lagging behind pre-pandemic levels. The company anticipates sequential improvements to continue. However, uncertainty with respect to pandemic-induced implications remains a concern.
Despite cost synergies from the ILG acquisition, the company has been bearing the brunt of steep expenses. Despite limited operations in 2020 due to the pandemic, total expenses were $2,984 million compared with $3,801 million in 2019. During the third quarter of 2021, total expenses increased 33.1% year over year to $896 million from $673 million reported in the year-ago quarter. Escalated marketing and sales expenses along with management and exchange costs affected total costs. This along with a rise in wage costs added to the downside. Going forward, costs are likely to rise due to the coronavirus impact.
Key Picks
Some better-ranked stocks in the Consumer Discretionary sector include Hilton Grand Vacations Inc. (HGV - Free Report) , Bluegreen Vacations Holding Corporation and Century Casinos, Inc. (CNTY - Free Report) .
Hilton Grand Vacations sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of 411.1%, on average. Shares of the company have increased 66.9% so far this year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Hilton Grand Vacations’ current financial-year sales and earnings per share (EPS) suggests growth of 189.5% and 158.1%, respectively, from the year-ago period’s levels.
Bluegreen Vacations flaunts a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 695%, on average. Shares of the company have soared 158.7% so far this year.
The Zacks Consensus Estimate for Bluegreen Vacations’ current financial-year sales and EPS indicates a rise of 27.5% and 199.3%, respectively, from the year-ago period’s levels.
Century Casinos carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 758.9%, on average. Shares of the company have increased 99.4% so far this year.
The Zacks Consensus Estimate for Century Casinos’ current financial-year sales and EPS suggests an improvement of 26.9% and 146.6%, respectively, from the year-ago period’s levels.