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Marriott (MAR) Q3 Earnings Top, Stock Down on Revenue Miss

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Marriott International, Inc. (MAR - Free Report) reported mixed third-quarter 2018 results, wherein earnings surpassed the Zacks Consensus Estimate but revenues lagged the same.

Adjusted earnings of $1.70 per share surpassed the Zacks Consensus Estimate of $1.31 and increased 62% year over year. Total revenues were $5.05 billion, which missed the consensus mark of $5.37 billion and declined 0.6% from the year-ago quarter figure.

The company stated that while its asset-light model and cash generating ability are major positives, fourth-quarter revenue per available room (RevPAR) growth might face headwinds due to weak demand in North America.

Given the lower-than-expected top-line performance, weak demand in North America and overall headwinds characterizing the hotel industry; investors might have had reasons to worry as shares of Marriot declined more than 5% in after-hours trading on Nov 5. Moreover, the company’s shares have lost 3% in the past three months compared with the industry’s 6.7% decline.


RevPAR & Margins

In the quarter under review, RevPAR for worldwide comparable system-wide properties increased 1.9% in constant dollars (up 1.2% in actual dollars), driven by a 2.2% improvement in average daily rate (ADR), partially offset by 0.2% fall in occupancy.

Comparable system-wide RevPAR in North America grew 0.6% in constant dollars (up 0.4% in actual dollars).

In a constant-dollar basis, international comparable system-wide RevPAR rose 5.4% (up 3.2% in actual dollars). Both occupancy rate and ADR rose 0.9% and 4%, respectively.

Worldwide comparable company-operated house profit margin expanded 20 basis points (bps) in the reported quarter. The expansion can be attributed to robust cost control and synergies from the Starwood acquisition.

Further, North American comparable company-operated house profit margins contracted 10 bps. Meanwhile, house profit margins for comparable company-operated properties outside North America rose 50 bps.

Total expenses were up 4.5% year over year to $4.5 billion, mainly owing to higher reimbursed, and general, administrative and other expenses. However, Owned, leased, and other expenses declined sharply in the quarter under review.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were $900 million, up 12% year over year.

Marriott International Price, Consensus and EPS Surprise

 

Fourth-Quarter 2018 Outlook

For the fourth quarter, the company expects comparable system-wide RevPAR to increase roughly 1% in North America, down from 1.5-2% mentioned earlier. Marriott anticipates the same to rise 5-6% outside North America and approximately 2% worldwide (down from 2.5-3% stated earlier).

Furthermore, gross fee revenues are projected between $900 million and $910 million, up 4-6% on a year-over-year basis. This compares unfavorably with the previous guidance of $929 million to $944 million, which represented 8-10% growth on a year-over-year basis.

General, administrative, and other expenses are expected to be $245-$250 million, up from $236-$241 million mentioned earlier. Adjusted EBITDA is anticipated to be $847 million to $862 million, up 7-9% year over year. Previously, the company expected the same to be $896-$916 million, up 14-16% year over year.

Earnings per share are envisioned to be $1.37-$1.41, down from $1.47-$1.52 stated earlier.

2018 View

For 2018, Marriott anticipates earnings of $6.15-$6.18 per share, up from $5.81-$5.91 provided earlier.

Comparable system-wide RevPAR is expected to increase 2% in North America (down 2-3% mentioned earlier), 6% outside North America (up from last guidance of 5-6%) and 3% worldwide (earlier guidance was 3-4%). Room deletions are expected to be 2% for the current year, down from 5% as previously guided.

Operating income is envisioned to be $2,741 to $2,756 million compared with $2,725-$2,770 million stated earlier. General, administrative and other expenses are anticipated to be $930-$935 million. It was lower than the earlier guidance of $935-$945 million. Adjusted EBITDA is expected to be between $3,456 million and $3,471 million, up from $3,450 million to $3,495 million mentioned previously.

Zacks Rank & Peer Releases

Marriott currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Hyatt (H - Free Report) posted mixed third-quarter 2018 results, wherein earnings surpassed the Zacks Consensus Estimate while revenues lagged the same. Adjusted earnings of 33 cents per share outpaced the consensus estimate of 25 cents by 32%. The bottom line also grew 37.5% on a year-over-year basis.

Hilton (HLT - Free Report) reported mixed third-quarter 2018, wherein earnings surpassed the Zacks Consensus Estimate but revenues lagged the same. Hilton’s adjusted earnings of 77 cents per share surpassed the consensus estimate by a couple of cents and surged 38% on a year-over-year basis.

Extended Stay America reported better-than-expected earnings for the fourth straight quarter in third-quarter 2018. Adjusted earnings were 39 cents per share, outpacing the Zacks Consensus Estimate of 38 cents. The bottom line grew 11.4% year over year on a drop in effective tax rate as well as lower depreciation and general and administrative expenses. Share repurchase also boosted earnings.

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