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Marriott Vacations Worldwide

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Marriott Vacations Worldwide Corporation (VAC - Free Report) raised its adjusted earnings per share outlook for 2012 during its third-quarter report, which helped this timeshare company hit a 52-week high of $41.73 on October 18 and become a Zacks #1 Rank (Strong Buy) on October 23.

Excellent Q3

On October 18, Marriott Vacations Worldwide posted adjusted net income of $8 million for the third quarter; up $5 million from Last year. However, adjusted earnings of 23 cents per share fell short of the Zacks Consensus Estimate.

Total revenue inched up 1.3% to $383 million, benefiting from higher rental revenues, resort management and other services revenues and cost reimbursements. The North America segment continued its strong performance with contract sales up 13% and volume per guest up 19%.

The adjusted development margin expanded 11.9% to 20.9% as a result of a 14.5% increase in North America adjusted development margin. Adjusted EBITDA was $33 million, up 106.3%.

The organizational and separation plan related to the company's spin-off from Marriott International, Inc. (MAR) is expected to drive $15 million to $20 million of annualized savings by 2014.

Encouraging Outlook

Based on the strength in its North America segment, management raised its adjusted earnings per share outlook for 2012 to between $1.17 and $1.31 from the prior projection of $1.03 to $1.17. Adjusted EBITDA guidance was also raised to between $130 million and $140 million from $115 million to $125 million.

Rising Earnings Estimate Revisions

Over the last 30 days, three out of 4 estimates have been revised upward for both 2012 and 2013. The Zacks Consensus Estimate for this year is up 10.4% to $1.27, while the Zacks Consensus Estimate for next year has climbed 17.0% to $1.79.

These outlooks suggest year-over-year growth of 114.8% for 2012 and roughly 41.4% for 2013.

Attractive Valuation

The valuation for Marriott Vacations Worldwide looks compelling compared with its peers by most metrics. On a price-to-book (P/B) basis, shares trade at 1.19x, a discount to the peer group average of 1.96x. Also, the company has a price-to-sales (P/S) ratio of 0.84, a 46.2% discount to the peer group average of 1.56. Moreover, the company’s long-term estimated earnings per share growth rate remains strong at 30.0%.

Chart Shows Growth Potential

Since July 25, shares of Marriott Vacations Worldwide have consistently fared better than the simple moving average for 50 days. Moreover, the stock has always been trading above its 200 day moving average. The continuous uptrend in stock prices, as mirrored in the following chart, offers an enticing upside potential going forward.

Volume is fairly strong, averaging 312K daily. The year-to-date return for the stock is a robust 134.62%, which is substantially higher than the S&P 500’s 12.08%.

Based in Orlando, Marriott Vacations Worldwide spun-off from Marriott International in late 2011. Marriott Vacations is a developer, marketer, seller and manager of vacation ownership resorts and vacation club, destination club and exchange programs, principally under the Marriott and Ritz-Carlton brands and trademarks. The company has three segments: North America, Luxury and Europe, and Asia-Pacific.

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