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Will Marriott (MAR) Let Down Investors this Earnings Season?

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Marriott International, Inc. (MAR - Free Report) is scheduled to report second-quarter 2016 results on Jul 27, after market close.

Notably, Marriott has inked a definitive agreement to purchase Starwood Hotels & Resorts Worldwide Inc. , which will lead to the creation of the world's largest hotel company.

Meanwhile, last quarter, Marriott posted a positive earnings surprise of 3.57%. In fact, the company’s earnings surpassed the Zacks Consensus Estimate in all of the last four quarters, with an average beat of 2.88%.

MARRIOTT INTL-A Price and EPS Surprise

MARRIOTT INTL-A Price and EPS Surprise | MARRIOTT INTL-A Quote

Let’s see how things are shaping up for this announcement.

Factors Likely to Influence this Quarter

For the second quarter, Marriott expects earnings per share in the range of 96 cents to $1.00, up from the year-ago level of 82 cents. Notably, the Zacks Consensus Estimate of 98 cents is in line with the mid-point of the guided range.

Meanwhile, comparable system-wide RevPAR are expected to increase 3–5% in North America, 2–4% outside North America and 3–5% worldwide. Further, its investments in technology for hotel bookings would improve guest experience, which in turn should boost occupancy in the to-be-reported quarter.

However, lingering global uncertainty in economies like Europe, Brazil and China is likely to limit revenue growth. Also, soft demand in the oil producing regions is likely to mar RevPAR in the to-be-reported quarter. Apart from that, in the domestic market, the company is facing competition in New York due to a continuous increase in the number of hotels, which might limit room rents and hurt RevPAR.

Additionally, despite the weakening of the U.S. dollar in 2016, negative currency translation is expected to reduce the value of overseas sales, given Marriott’s significant international presence. The company is simultaneously bearing the brunt of the Venezuelan currency devaluation. Such volatility in exchange rates is thus expected to hurt revenues and profits in the second quarter.

Earnings Whispers

Our proven model does not conclusively show that Marriott is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.

Zacks ESP: Marriott has an Earnings ESP of -1.02%. This is because the Most Accurate estimate stands at 97 cents, whereas the Zacks Consensus Estimate is pegged higher at 98 cents.

Zacks Rank: Marriott has a Zacks Rank #4 (Sell). Please note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

Vail Resorts Inc. (MTN - Free Report) has an earnings ESP of +1.21% and a Zacks Rank #2.

Penn National Gaming Inc. (PENN - Free Report) has an earnings ESP of +6.90% and a Zacks Rank #3.

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