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Why Is Marriott (MAR) Up 35.3% Since Last Earnings Report?

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A month has gone by since the last earnings report for Marriott International (MAR - Free Report) . Shares have added about 35.3% 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 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 Q1 Earnings Miss, Revenues Beat Estimates

Marriott International reported mixed first-quarter 2020 results, wherein earnings missed the Zacks Consensus Estimate but revenues surpassed the same. 

Adjusted earnings of 26 cents per share lagged the Zacks Consensus Estimate of 84 cents. The bottom line declined 81.6% from the prior-year quarter. The company’s earnings in the quarter included impairment charges, bad debt expense, and guarantee reserves of $138 million after-tax (42 cents per share) owing to the coronavirus. 

Total revenues of $4,681 million beat the consensus mark of $4,059 million. However, the top line declined 7% on a year-over-year basis. Base management and Franchise fee came in at $214 million and $415 million, down 24% and 8% year over year, respectively.

At the end of first-quarter 2020, Marriott's development pipeline totaled roughly 3,050 hotels, with approximately 516,000 rooms. Further, nearly 230,000 rooms were under construction.

RevPAR & Margins

In the quarter under review, revenue per available room (RevPAR) for worldwide comparable system-wide properties fell 22.5% in constant dollars (down 22.7% in actual dollars) on account of 14.5% and 1.5% decline in occupancy and average daily rate (ADR), respectively. These metrics were impacted by the coronavirus pandemic.

Comparable system-wide RevPAR in North America fell 19.5% in constant dollars (down 19.5% in actual dollars) owing to a 1.8% decline in ADR and 12.4% decrease in occupancy.

On a constant-dollar basis, international comparable system-wide RevPAR slumped 30.4% (down 31.3% in actual dollars), owing to a 19.6% and 0.9% decline in occupancy and ADR, respectively.

Total expenses were down 1% year over year to $4,567 million, primarily due to decline in Reimbursed expenses.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) amounted to $442 million, down 46% with the year-ago figure.

Coronavirus Impact

The coronavirus outbreak will hurt the company’s results in 2020. However, the company is unable to estimate any financial impact of the coronavirus outbreak at the moment as the duration and extent of the outbreak cannot be ascertained.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -321.25% due to these changes.

VGM Scores

At this time, Marriott has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. 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.

Outlook

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


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