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Marriott (MAR) Q4 Earnings Beat, Revenues Miss, Stock Down

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Marriott International, Inc. (MAR - Free Report) reported mixed fourth-quarter 2018 results, wherein earnings surpassed the Zacks Consensus Estimate but revenues lagged the same.

Following the quarterly results, shares of the company declined 1% in after-hours trading on Feb 28. Also, in the past year, the stock has lost nearly 9% against the S&P 500’s 4% gain. The lower-than-expected top-line performance, weak demand in North America and overall headwinds characterizing the hotel industry make investors apprehensive.

Adjusted earnings of $1.44 per share surpassed the Zacks Consensus Estimate of $1.40 and increased 32% year over year. Total revenues came in at $5,289 million, which missed the consensus mark of $5,607 million. However, the top line inched up 0.7% from the year-ago quarter’s figure.

Marriott International Price, Consensus and EPS Surprise

RevPAR & Margins

In the quarter under review, RevPAR for worldwide comparable system-wide properties increased 1.3% in constant dollars (up 0.1% in actual dollars) driven by a 2.2% improvement in average daily rate (ADR), partially offset by a 0.7% fall in occupancy.

Comparable system-wide RevPAR in North America grew 0.2% in constant dollars (up flat in actual dollars) owing to a 1.9% gain in ADR, partially overshadowed by a 1.2% decline in occupancy.

On a constant-dollar basis, international comparable system-wide RevPAR rose 4% (up 0.3% in actual dollars). Both occupancy rate and ADR improved 0.7% and 3%, respectively.

Meanwhile, worldwide comparable company-operated house profit margins were flat as robust cost control and synergies from the Starwood acquisition were overshadowed by marginal growth in RevPAR and higher wages.

Further, North American comparable company-operated house profit margins contracted 20 basis points (bps). On the flip side, house profit margins for comparable company-operated properties outside North America expanded 20 bps.

Total expenses were up 1% year over year to $4.9 billion mainly due to higher reimbursed expenses as well as merger-related costs and charges. However, Owned, leased, and other expenses declined in the quarter under review.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were $864 million, up 10% year over year.

First-Quarter 2019 Outlook

For the first quarter of 2019, the company expects comparable system-wide RevPAR to increase in the range of 1-2% in North America in constant currency. Marriott anticipates the same to rise 2-4% outside North America and approximately 1-3% worldwide.

Furthermore, gross fee revenues are projected between $885 million and $905 million, up 5-7% on a year-over-year basis. Operating income is anticipated between $645 million and $670 million.

General, administrative, and other expenses are expected to be $215-$220 million. Adjusted EBITDA is anticipated to be $820-$845 million, up 6-10% year over year. Earnings per share are envisioned in the $1.30-$1.35 band compared with adjusted earnings of $1.34 in first-quarter 2018. The Zacks Consensus Estimate is pegged at $1.31.

2019 View

For 2019, Marriott anticipates earnings of $5.87-$6.10 per share compared with $6.21 reported in the prior-year. The Zacks Consensus Estimate for 2019 is pegged at $6.16. The company expects gross fee revenues between $3,830 million and $3,910 million, up 5-7% from the year-ago period.

Comparable system-wide RevPAR is expected to increase in the range of 1-3% in North America, 2-4% outside North America and 1-3% worldwide. Marriot expects room additions of nearly 5.5% in 2019, which comprises deletions of 1-1.5%.

Operating income is envisioned to be $2,915-$3,015 million. General, administrative and other expenses are anticipated to be $910-$920 million. Adjusted EBITDA is projected in the band of $3,615-$3,715 million, up 4-7% from 2018.

Marriott currently has a Zacks Rank #4 (Sell).

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

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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