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Marriott Vacations (VAC) Q2 Earnings Miss Estimates, Fall Y/Y

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Marriott Vacations Worldwide Corporation (VAC - Free Report) reported mixed results for second-quarter 2020, wherein earnings missed the Zacks Consensus Estimate but revenues beat the same.

In the quarter under review, adjusted loss per shares came in at $1.76, wider than the Zacks Consensus Estimate of a loss of $1.11. In the prior-year quarter, the company reported adjusted earnings of $2 per share.

Total revenues of $480 million beat the consensus mark of $450 million by 6.7%. However, the top line declined 54% on a year-over-year basis.

Segmental Performances

Vacation Ownership: During the second quarter, the segment’s revenues declined 56.2% year over year to $405 million, compared with $924 million as on Jun 30, 2019. The decline can be primarily attributed to lower resort occupancies resulting from the coronavirus pandemic.

Revenues, excluding cost reimbursements, fell 69% year over year owing to a 92% decline in contract sales and a 91% fall in rental revenues, partially offset by growth in management fees and financing revenues.
 
The segment’s adjusted EBITDA came in at ($19) million against $203 million in the prior-year quarter.

Exchange & Third-Party Management: The segment’s revenues totaled $58 million in the quarter, down 50% from year-ago quarter’s $116 million. The decline can be primarily attributed to lower exchange and rental transactions in its Interval International business due to the impact of the coronavirus pandemic.

During the second quarter, total Interval Network active members declined 7% year over year to 1.6 million, while interval International average revenue per member fell 30% to $30.17. The segment’s adjusted EBITDA declined 58.7% year over year to $41 million.

Corporate and Other results

General and administrative costs improved $45 million year over year, courtesy of synergy savings and decline in compensation-related expenses. It also included $6-million credit under the CARES Act legislation, thereby motivating the company to pay associates' benefit costs while not working.

Expenses & EBITDA

Total expenses in the quarter declined 42.1% year over year to $521 million, compared with $900 million reported in the year-ago quarter.

The company’s adjusted EBITDA in the second quarter came in at ($10) million against $195 million reported in the year-ago quarter.

Balance Sheet

Cash and cash equivalents, as of Jun 30, 2020, were $566 million. The company had $4.6 billion in debt outstanding (net of unamortized debt issuance costs) at the end of the second quarter, up $0.5 billion from year-end 2019. This includes $2.7 billion of corporate debt and $1.9 billion of non-recourse debt related to its securitized notes receivable.

During the second quarter, the company issued $500 million of senior secured notes and repaid the entire outstanding balance on its Revolving Corporate Credit Facility.

Owing to the uncertainty tied to the pandemic, the company has temporarily suspended its share repurchases and dividend payouts.

Operational Update

Marriott Vacations has started reopening resorts and sales centers amid the pandemic. As of Jun 30, the company opened eight sales centers in its vacation ownership business. Another 34 sales centers have been reopened since then.

The company said less than 240 resorts are closed in its Interval International business.

Resultantly, 40% of its associates are still on furlough while 16% are on reduced work week (or reduced pay). However, for those who have returned from furlough, majority have been assigned to the resort operations area.

Zacks Rank & Key Picks

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

Some better-ranked stocks in the Consumer Discretionary sector are Monarch Casino & Resort, Inc. (MCRI - Free Report) , YETI Holdings, Inc. (YETI - Free Report) and Pool Corporation (POOL - Free Report) , each sporting a Zacks Rank #1.

Earnings in 2021 for Monarch Casino are expected to surge 1033.4%.

YETI Holdings has a three-five-year earnings per share growth rate of 16.2%.

Pool Corporation has a trailing four-quarter earnings surprise of 16%, on average.

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