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Marriott (MAR) Q4 Earnings to Gain Despite Slow RevPAR Growth

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Marriott International, Inc. (MAR - Free Report) is scheduled to report fourth-quarter 2018 results on Feb 28, after the closing bell.

The acquisition of Starwood continues to add value to the company’s portfolio. We believe that an asset-light business model despite significant acquisitions may have aided the company’s earnings in the fourth quarter of 2018.

However, despite expansion and increased travel demand, the company is facing decelerating revenue per available room (RevPAR) growth, which is likely to have hurt fourth-quarter top-line results.

What is Hurting Top-Line Growth?

Marriott’s top line is particularly suffering due to a decline in Owned, leased, and other revenues. Although total revenues increased 1.3% year over year in the first nine months of 2018, the Owned, leased, and other revenue segment saw a decline of 6.3% in the same comparable period.

We believe that the downward trend in the segment’s revenues is likely to have continued in the fourth quarter and have affected overall revenues. The Zacks Consensus Estimate for revenues in the fourth quarter is pegged at $5.6 billion, reflecting a 4.6% decline from the year-ago quarter.

Meanwhile, the company expects comparable systemwide RevPAR growth to slow down in the fourth quarter. It anticipates comparable system-wide RevPAR increasing roughly 1% in North America, down from 1.5-2% mentioned earlier. Marriott anticipates the same to rise 5-6% outside North America and approximately 2% worldwide (down from 2.5-3% stated earlier).

The company expects a 110-basis-point (bps) headwind, stemming from the hurricane relief efforts in Texas and Florida. It also thinks that comparable systemwide RevPAR will be hurt due to weaker-than-expected transient demand during September.

Earnings to Gain

In the third quarter of 2018, Marriott’s earnings increased 62% year over year. The company stated that its asset-light model and cash generating ability are major positives for making profits. It expects to record 7-9% year-over-year growth in fourth-quarter adjusted EBITDA while earnings are predicted to be $1.37-$1.41.

The Zacks Consensus Estimate pegs the quarter’s earnings at $1.40, near the higher end of the company’s guided range. This reflects that earnings are slated to grow 25% from the year-ago quarter.

What Does the Zacks Model Say?

Our proven model does not conclusively predict that Marriott is likely to beat earnings estimates in the fourth 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. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Marriott has an Earnings ESP of 0.00% and a Zacks Rank #3, making the surprise prediction difficult. You can see the complete list of today’s Zacks #1 Rank stocks here.

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

Marriott International Price and EPS Surprise

 

Peer Releases

Hyatt (H - Free Report) reported mixed fourth-quarter 2018 results, wherein earnings surpassed the Zacks Consensus Estimate while revenues lagged the same. With this, the bottom line exceeded the consensus mark for 12 straight quarters while the top line missed the same for the fourth consecutive quarter.

Hilton (HLT - Free Report) reported mixed results for fourth-quarter 2018, wherein earnings surpassed the Zacks Consensus Estimate but revenues lagged the same. Notably, revenues missed the consensus mark for the fourth straight quarter.

Choice Hotels (CHH - Free Report) reported mixed results in fourth-quarter 2018, wherein earnings surpassed the Zacks Consensus Estimate but revenues lagged the same.

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