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Marriott (MAR) to Report Q3 Earnings: A Beat in the Cards?

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We expect Marriott International, Inc. (MAR - Free Report) to beat expectations when it reports third-quarter 2016 numbers on Nov 7, after market close.

Marriott recently completed its acquisition of Starwood Hotels & Resorts Worldwide Inc., which led to the creation of the world's largest hotel company.

Last quarter, Marriott posted a positive earnings surprise of 5.10%. In fact, the company’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, with an average beat of 3.85%.

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

MARRIOTT INTL-A Price and EPS Surprise



Why a Likely Positive Surprise?

Our proven model shows that Marriott is likely to beat on earnings because it has the perfect combination of the two key ingredients.

Zacks ESP: Earnings ESP for Marriott is +1.11% because the Most Accurate estimate is pegged at 91 cents while the Zacks Consensus Estimate is 90 cents. A favorable Zacks ESP serves as a meaningful indicator of a likely positive earnings surprise. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.  

Zacks Rank: Marriott currently has a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings estimates. Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.

The combination of Marriott‘s favorable Zacks Rank and positive ESP makes us reasonably confident of an earnings beat.

What is Driving the Better-than-Expected Earnings?

Marriott’s earnings have been surpassing the Zacks Consensus Estimate consistently over the past few quarters on the back of solid RevPAR growth as well as strong margins. We expect the trend to continue in the to-be-reported quarter as well.

Increasing business and leisure travel, higher transaction volumes along with continued expansion of the portfolio should further boost the quarter’s results. Additionally, the company’s investments in technology for hotel bookings would improve guest experience, which in turn should boost occupancy in the third quarter.

Meanwhile, for the third quarter, Marriott expects comparable system-wide RevPAR to increase 3–4% in North America, outside North America and worldwide, without including the Starwood acquisition impact.

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 and heightened competition in the domestic market might mar RevPAR in the to-be-reported quarter.

Additionally, though the U.S. dollar weakened slightly in 2016 from the previous year, the negative currency impact is still significant and expected to reduce the value of overseas sales given Marriott’s significant international presence. This would hurt revenues and profits in the to-be-reported quarter.

Stocks to Consider

Marriott is not the only company looking up this earnings season. Here are some other companies to consider as our model shows that they also have the right combination of elements to post an earnings beat this quarter:

Vail Resorts Inc. (MTN - Free Report) has an Earnings ESP of +4.46% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

MGM Resorts International (MGM - Free Report) has an Earnings ESP of +44.44% and a Zacks Rank #3.

AMC Entertainment Holdings, Inc. (AMC - Free Report) has an Earnings ESP of +3.57% and a Zacks Rank #3.

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