It has been about a month since the last earnings report for Marriott International, Inc. (MAR - Free Report) . Shares have added about 3.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Marriott International, Inc. due for a pullback? 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 catalysts.
Marriott International reported mixed third-quarter 2019 results, wherein earnings missed the Zacks Consensus Estimate but revenues beat the same. Notably, the top line surpassed the consensus estimate after lagging the same in the preceding six quarters.
Adjusted earnings of $1.47 per share lagged the Zacks Consensus Estimate of $1.49 and decreased 13.5% year over year. The company’s earnings in the year-ago quarter included a gain of 26 cents from an asset sale.
Total revenues of $5,284 million surpassed the consensus mark of $5,157 million. The top line also increased 4.7% on a year-over-year basis.
During the third quarter, Marriott's development pipeline totaled roughly 2,950 hotels, with approximately 495,000 rooms. Also, nearly 214,000 pipeline rooms were under construction. It exited 11 properties at the end of the reported quarter.
RevPAR & Margins
In the quarter under review, revenue per available room (RevPAR) for worldwide comparable system-wide properties increased 1.5% in constant dollars (up 0.9% in actual dollars), driven by a 0.7% improvement in average daily rate (ADR) and 0.6% increase in occupancy.
Comparable system-wide RevPAR in North America grew 1.3% in constant dollars (up 1.3% in actual dollars) owing to a 1% gain in ADR and 0.3% increase in occupancy.
On a constant-dollar basis, international comparable system-wide RevPAR rose 1.9% (down 0.2% in actual dollars), owing to a 1.5% rise in occupancy. The metric was partially offset by a 0.2% decline in ADR.
Meanwhile, worldwide comparable company-operated house profit margins decreased 30 basis points (bps) as robust cost control and synergies from the Starwood acquisition were offset by marginal growth in RevPAR and increase in wages.
North American comparable company-operated house profit margins contracted 70 bps. On the flip side, house profit margins for international comparable company-operated house profit margins increased 10 bps.
Total expenses increased 5% year over year to $4,677 million, mainly due to a rise in owned, leased and other expenses.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) summed $901 million, flat with the year-ago figure.
Fourth-Quarter 2019 View
For fourth-quarter 2019, the company expects comparable system-wide RevPAR to increase in the range of flat to up 1% in North America (in constant currency). Marriott anticipates the same to rise 1% outside North America and approximately 1% worldwide.
Furthermore, gross fee revenues are projected between $960 million and $970 million, pointing to 5-7% improvement on a year-over-year basis. Operating income is anticipated between $715 million and $730 million.
General, administrative and other expenses are expected within $250-$255 million. Adjusted EBITDA is anticipated in the range of $898-$913 million, indicating 4-6% year-over-year improvement. Earnings per share are envisioned in the $1.44-$1.47 band. Notably, the Zacks Consensus Estimate for fourth-quarter earnings is pegged at $1.56 per share.
For 2019, Marriott anticipates earnings within $5.87-$5.9 per share compared with $5.97-$6.06 projected earlier. The Zacks Consensus Estimate for full-year earnings is pegged at $6.01 per share. Gross fee revenues are expected between $3,809 million and $3,819 million, suggesting 5% growth from the year-ago period.
Comparable system-wide RevPAR is expected to increase approximately 1% in North America, 2% outside North America and 1% worldwide. Marriot now expects room additions to be nearly 5-5.25% in 2019.
Operating income is envisioned within $2,890-$2,905 million compared with 2,910-$2,950 million estimated earlier. General, administrative and other expenses are anticipated in the range of $921-$926 million. Adjusted EBITDA is projected in the band of $3,572-$3,587 million, implying 3% growth from 2018.
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 -6.42% due to these changes.
Currently, Marriott International, Inc. has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Marriott International, Inc. has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.