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Why Is Marriott (MAR) Down 3.5% Since Last Earnings Report?

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It has been about a month since the last earnings report for Marriott International (MAR - Free Report) . Shares have lost about 3.5% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Marriott due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Marriott Q2 Earnings & Revenues Top Estimates, Rise Y/Y

Marriott reported impressive second-quarter 2022 results, with earnings and revenues surpassing the Zacks Consensus Estimate. The top and bottom line increased on a year over year basis.

Earnings & Revenue Discussion

In the quarter under review, Marriott’s adjusted earnings per share were $1.80, surpassing the Zacks Consensus Estimate of $1.59. In the prior-year quarter, the company reported adjusted earnings of 79 cents per share.

Quarterly revenues of $5,338 million surpassed the consensus mark of $4,970 million. The top line surged 69.5% on a year-over-year basis. During the quarter, revenues from Base management and Franchise fee came in at $269 million and $669 million compared with $156 million and $431 million reported in the prior-year quarter.

During the quarter, the company reported solid contributions from co-brand credit card fees, thereby reflecting a rise of 40% year over year. The upside was primarily backed by strength in global cardholder acquisitions and cardholder spending.

RevPAR & Margins

In the quarter under review, RevPAR for worldwide comparable system-wide properties fell 2.9% (in constant dollars) compared with 2019 levels. The downside was primarily driven by a fall in occupancy (7.1% from 2019 levels). However, the average daily rate (ADR) increased by 7.2% from 2019 levels.

Comparable system-wide RevPAR in Asia Pacific (excluding China) fell 21.7% (in constant dollars) from 2019 levels. Occupancy and ADR declined 11% and 7.1%, respectively, from 2019 levels. Comparable system-wide RevPAR in Greater China fell 52.2% from 2019 levels.

On a constant-dollar basis, international comparable system-wide RevPAR fell 14.1% compared with 2019 levels. Occupancy declined 11.8% from 2019 levels. However, ADR was up 3.6% from 2019 levels. Comparable system-wide RevPAR in Europe fell 4.3%, while RevPAR in the Caribbean & Latin America increased 12.9% from 2019 levels.

Total expenses during the quarter increased 64.8% year over year to $ 4,388 million, primarily owing to a rise in Reimbursed expenses.

During the first quarter, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) amounted to $1,019 million compared with $558 million reported in the prior-year quarter.

Balance sheet

At the end of the second quarter, Marriott's net debt amounted to $8.3 billion compared with $8.5 billion reported in the previous quarter. Cash and cash equivalents as of Jun 30, 2022, came in at $1.4 billion, flat sequentially.

During the quarter, the company resumed its share repurchase activity. Year to date (through Jul 29, 2022), the company repurchased 2.9 million shares of its common stock worth approximately $448 million.

Unit Developments

At the end of second-quarter 2022, Marriott's development pipeline totaled nearly 2,942 hotels, with approximately 495,000 rooms. Nearly 203,300 rooms were under construction.

During the quarter, the company added 97 new properties (16,917 rooms) to its worldwide lodging portfolio. For 2022, the company anticipates net room growth in the range of 3-3.5%, year over year.

Outlook

For third-quarter 2022, the company anticipates gross fee revenues in the range of $1,010-$1,050 million. Adjusted EBITDA is expected to be between $927 million and $972 million. The company expects third-quarter diluted EPS to be between $1.59 and $1.69.

For the third quarter, the company anticipates worldwide system-wide RevPAR to remain in the range of flat to 3% growth from 2019 levels. RevPAR in the United States and Canada is expected to increase 1-4% from 2019 levels. Meanwhile, international RevPAR is expected to lie between negative 3% to flat from 2019 levels.

For 2022, the company anticipates gross fee revenues in the range of $ $3,930-$4,030 million. General and administrative expenses for 2022 are projected to be between $890 million and $900 million. Adjusted EBITDA is expected to be between $3,682 million to $3,792 million. The company expects 2022 diluted EPS in the range of $6.33-$6.59. Full-year capital return is projected to be more than $2,200 million.

The company anticipates 2022 worldwide RevPAR to decline 3-6% from 2019 levels.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month.

The consensus estimate has shifted 6.55% due to these changes.

VGM Scores

At this time, Marriott has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Marriott has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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