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Marriott (MAR) Q1 Earnings Beat, Revenues Lag Estimates

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Marriott International, Inc. (MAR - Free Report) reported mixed first-quarter 2019 results, wherein earnings surpassed the Zacks Consensus Estimate but revenues lagged the same. Notably, this marked the fifth straight quarter of revenue miss.

Adjusted earnings came in at $1.41 per share, outpacing the Zacks Consensus Estimate of $1.34 and increasing 5% year over year. The upside was driven by lower effective tax rate as well as increase in room rates.

Total revenues of $5,012 million missed the consensus mark of $5,117 million. However, the top line was almost flat with the prior-year quarter number.

RevPAR & Margins

In the quarter under review, RevPAR for worldwide comparable system-wide properties increased 1.1% in constant dollars (down 0.3% in actual dollars) driven by a 1.5% improvement in average daily rate (ADR). The metric was partially offset by a 0.3% fall in occupancy.

Comparable system-wide RevPAR in North America grew 0.8% in constant dollars (up 0.6% in actual dollars) owing to a 2% gain in ADR, partially overshadowed by a 0.8% decline in occupancy.

On a constant-dollar basis, international comparable system-wide RevPAR rose 1.9% (down 2.5% in actual dollars). Both occupancy rate and ADR improved 1.1% and 0.2%, 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 increase in wages.

North American comparable company-operated house profit margins expanded 30 basis points (bps). On the flip side, house profit margins for comparable company-operated properties outside North America declined 30 bps.

Total expenses decreased 1% year over year to $4.5 billion mainly due to decline in Owned, leased, and other expenses.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) summed $821 million, up 7% year over year.

Marriott International Price, Consensus and EPS Surprise


Marriott International Price, Consensus and EPS Surprise

Marriott International price-consensus-eps-surprise-chart | Marriott International Quote

Second-Quarter 2019 Outlook

For the second quarter of 2019, the company expects comparable system-wide RevPAR to increase in the range of 1-2% in North America at 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 $900 million and $1,010 million, up 4-6% on a year-over-year basis. Operating income is anticipated between $770 million and $795 million.

General, administrative, and other expenses are expected to be $225-$230 million. Adjusted EBITDA is anticipated to be $940-$965 million, flat to up 3% year over year. Earnings per share are envisioned in the $1.52-$1.58 band compared with adjusted earnings of $1.73 in second-quarter 2018. The Zacks Consensus Estimate is pegged at $1.64.

2019 View

For 2019, Marriott anticipates earnings of $5.97-$6.19 per share compared with the prior estimate of $5.87-$6.10. The Zacks Consensus Estimate for 2019 earnings is pegged at $6.05. The company expects gross fee revenues between $3,845 million and $3,925 million, suggesting 6-8% rise 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 continues to expect room additions of nearly 5.5% in 2019, which comprises deletions of 1-1.5%.

Operating income is envisioned to be $2,925-$3,025 million. General, administrative and other expenses are anticipated to be $920-$930 million. Adjusted EBITDA is projected in the band of $3,615-$3,715 million, indicating 4-7% growth from 2018.

Zacks Rank & Key Picks

Marriott has a Zacks Rank #3 (Hold). Better-ranked stocks worth considering in the same space include Huazhu Group Limited (HTHT - Free Report) , Red Lion Hotels Corporation (RLH - Free Report) and Wyndham Destinations, Inc. (WYND - Free Report) . While Huazhu Group sports a Zacks Rank #1 (Strong Buy), Red Lion Hotels and Wyndham Destinations carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Huazhu Group Limited, which was previously known as China Lodging Group Limited, has an impressive long-term earnings growth rate of 20.9%.

Red Lion Hotels’ bottom line for the current year is likely to increase 93.3%.

Wyndham Destinations reported better-than-expected earnings in the trailing four quarters, the average being 5.9%.

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