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Marriott (MAR) Q2 Earnings Top, Stock Down on Revenue Miss

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Marriott International, Inc. (MAR - Free Report) reported mixed second-quarter 2018 results, wherein earnings surpassed the Zacks Consensus Estimate but revenues lagged the same. Adjusted earnings of $1.73 per share surpassed the Zacks Consensus Estimate of $1.36 and increased 56% year over year.  Total revenues came in at $5,346 million, which missed the consensus mark of $5,978 million but increased 2.6% from the year-ago quarter number.

Following the quarterly results, the company’s shares decreased 3.7% in after-hours trading on Aug 6.The decline can be primarily attributed to its lower-than-expected top-line performance. Moreover, the stock has lost 7.2% in the past three months compared with the industry’s 11.6% decline.

RevPAR & Margins

In the quarter under review, revenue per available room (RevPAR) for worldwide comparable system-wide properties increased 3.8% in constant dollar (up 5.1% in actual dollars) driven by 3.8% growth in occupancy and a 1.3% improvement in average daily rate (ADR). In fact, the reported figure was within the management’s guided range of up 3-4% on a constant-dollar basis.

Comparable system-wide RevPAR in North America grew 3.1% in constant dollars (up 3.4% in actual dollars). Occupancy rate and ADR also increased 3.1% and 0.9%, respectively.

In constant dollar, international comparable system-wide RevPAR rose 5.7% (up 10.1% in actual dollars). Both occupancy rate and ADR rose 4.1% and 1.3%, respectively.

Worldwide comparable company-operated house profit margin expanded 60 basis points (bps) in the reported quarter. The expansion can be attributed to robust cost controls and synergies from the Starwood acquisition.

Also, North American comparable company-operated house profit margins expanded 60 bps. Meanwhile, house profit margins for comparable company-operated properties outside North America rose 50 bps.

Total expenses were up 3% year over year to $4,606 million mainly owing to higher reimbursed expenses. However, general, administrative and other expenses decreased in the quarter under review.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were $939 million, up 15% year over year.

Marriott International Price, Consensus and EPS Surprise

Third-Quarter 2018 Outlook

For the third quarter, the company anticipates comparable system-wide RevPAR to increase in the range of 1.5-2% (on a constant-dollar basis) in North America. This reflects the unfavorable impact of the week shift of Independence Day. Outside North America, Marriott expects the same to rise in the band of 5-6% and worldwide in the 2.5-3% range.

Furthermore, gross fee revenues are projected between $915 million and $935 million, up 11-13% on a year-over-year basis. General, administrative, and other expenses are expected to be in the range of $235-$240 million. Adjusted EBITDA is anticipated to be between $845 miilion and $870 million, up 5-8% on a year-over-year basis.

Earnings per share are envisioned in the range of $1.27-$1.33. The Zacks Consensus Estimate for third-quarter earnings is pegged at $1.40.

Fourth-Quarter 2018 Outlook

For the fourth quarter, the company expects comparable system-wide RevPAR to increase in the range of 1.5-2% (on a constant-dollar basis) in North America. Marriott anticipates the same to rise in the range of 5-6% outside North America and 2.5-3% worldwide.

Furthermore, gross fee revenues are projected between $929 million and $944 million, up 8-10% on a year-over-year basis. General, administrative, and other expenses are expected to be in the range of $236-$241 million. Adjusted EBITDA is anticipated to be in the $896-$916 million band, up 14-16% year over year. Earnings per share are envisioned in the range of $1.47-$1.52.

2018 View

For 2018, Marriott anticipates earnings in the band of $5.81-$5.91 per share, up from the prior-guided range of $5.43-$5.55.

Comparable system-wide RevPAR is expected to increase 2-3% in North America, 5-6% outside North America and 3-4% worldwide on a constant-dollar basis. Room deletions are expected to be 5% for the current year.

Additionally, projects fee revenues are projected to lie between $3,640 million and $3,675 million, including $360-$380 million of credit card branding fees. Incentive management fees are anticipated to increase by nearly 10% from $607 million in 2017.

While operating income is envisioned in the range of $2,725-$2,770 million, general, administrative and other expenses are anticipated in the $935-$945 million band. Adjusted EBITDA is expected to be between $3,450 million and $3,495 million.

Zacks Rank & Peer Releases

Marriott has a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

McDonald's (MCD - Free Report) reported impressive second-quarter 2018 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate. Adjusted earnings of $1.99 per share surpassed the consensus mark of $1.92 by 3.6% and increased 15% from the year-ago quarter (12% in constant currencies).

Darden (DRI - Free Report) reported better-than-expected results in the fourth quarter of fiscal 2018. Adjusted earnings of $1.39 per share outpaced the consensus estimate of $1.35 by 3%. The bottom line also increased 17.8% year over year on the back of higher revenues.

Chipotle (CMG - Free Report) reported better-than-expected results for the second quarter of 2018. Adjusted earnings of $2.87 per share topped the Zacks Consensus Estimate of $2.78 by 3.2%. The bottom line also grew 23.7% from the year-ago quarter number backed by increased revenues and lower food costs.

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