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Why Is Marriot Vacations Worldwide Corporation (VAC) Down 9.5% Since Last Earnings Report?

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It has been about a month since the last earnings report for Marriot Vacations Worldwide Corporation (VAC - Free Report) . Shares have lost about 9.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Marriot Vacations Worldwide Corporation due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Marriott Vacations Q1 Earnings & Revenues Lag Estimates

Marriott Vacations reported lower-than-expected first-quarter 2019 results, after beating the estimates in the preceding quarter. Adjusted earnings of $1.45 per share missed the Zacks Consensus Estimate of $1.69. However, the bottom line increased 4.3% year over year.

Quarterly revenues came in at $1,060 million, which lagged the consensus estimate of $1,076 million but increased 85.6% from the year-ago quarter. The upside can be attributed to revenue growth across segments.

The company is currently in the process of integrating and transforming the business, which is likely to drive additional growth opportunities.

Segmental Performances

Marriott Vacations’ business is operated under two major segments — Vacation Ownership (94.6% of total revenues in 2018) and Exchange & Third-Party Management (5.4%).

Vacation Ownership

Consolidated Vacation Ownership contract sales totaled $354 million, reflecting a 74% increase year over year. While Legacy-MVW contract sales amounted to $223 million, up 10% year over year, Legacy-MVW North America VPG sales increased 1% to $3,777.

Rental revenues in the first quarter were $147 million, up 98% from the first quarter of 2018. Rental revenues, net of expenses, summed $45 million, up 4% year over year.

Financing revenues increased 89% in the first quarter to $67 million. Financing revenues, net of expenses and consumer financing interest expenses, were $45 million, marking a 12% increase from the first quarter of 2018.

For resort management and other services, revenues increased 79% year over year in the quarter under review and came in at $125 million. Less of expenses, resort management revenues increased 5% to $59 million.

Exchange & Third-Party Management

Management and exchange revenues totaled $124 million in the quarter. Total Interval Network active members were 1.7 million at the end of quarter and average revenue per member was $46.24.

Expenses & EBITDA

Total expenses in the first quarter amounted to $969 million, up 87.1% year over year. The surge in expenses was mainly due to an increase in the cost of vacation ownership products as well as high rental, financing and administrative costs. Increased marketing and sales expenses along with management and exchange costs affected total costs. The company’s adjusted EBITDA in the first quarter of 2019 was $166 million, marking a whopping 163.5% increase from the year-ago quarter.

Balance Sheet

Cash and cash equivalents, as of Mar 31, 2019, was $222 million compared with $231 million as of 2018 end. Inventory increased to $910 million from $863 million by 2018 end.

2019 Outlook

For 2019, the company expects adjusted earnings of $7.33-$7.94 per share. Consolidated contract sales for the year is expected to be in the $1,530-$1,600 million range. Adjusted EBITDA is projected to be between $745 million and $785 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -5.65% due to these changes.

VGM Scores

At this time, Marriot Vacations Worldwide Corporation has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Marriot Vacations Worldwide Corporation has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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