Marriott (MAR) Beats Earnings, Revenues on Strong RevPAR - Analyst Blog

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Leading hotelier, Marriott International Inc. (MAR) posted better-than-expected third quarter 2014 results beating the Zacks Consensus Estimate for both earnings and revenues. The company raised its earnings guidance for 2014.

Adjusted earnings of 65 cents beat the Zacks Consensus Estimate of 62 cents by 4.8% and were up 25% year over year. Also, earnings beat management's guidance range of 59 cents–63 cents per share. The upside reflects an increase in revenue per available room (RevPAR) and strong margins.

Adjusted earnings exclude impairment charges, litigation reserve and unfavorable foreign exchange impact.

Revenues of $3.46 billion increased 9.5% year over year and also beat the Zacks Consensus Estimate of $3.45 billion by 0.3%, reflecting an increase in revenues at all its segments and solid RevPar growth. Base management and franchise fees increased 17% year over year to $381.0 million, incentive management fees moved up 26% and owned, leased, and other revenue, net of direct expenses were up 14.5% year over.

Adjusted EBITDA was $393.0 million, up 19% year over year, owing to an increase in revenues and strong margins.

RevPAR & Margins

Owing to an increase in demand, occupancy rate and average daily rate improved significantly in the domestic market as well as the international market. In the third quarter, RevPAR for worldwide comparable system-wide properties grew 8.1%, higher than management's expectation of 5.5% to 7.5% increase, driven by a 4.5% rise in average daily rate (ADR).

Comparable system-wide RevPAR in North America grew 8.7%, above management's guidance range of 6% to 8%, driven by a 5% rise in ADR. International comparable system-wide RevPAR climbed 5.6% and was toward the higher end of management's guidance range of 4% to 6% increase.

Worldwide comparable company-operated house profit margins were up 200 basis points (bps) owing to higher room rates and improved productivity. Adjusted operating margin (cost reimbursement excluded) increased to 43%, up 200 basis points year over year as increase in expenses were offset by revenues.

Update on Hotel Rooms

During the third quarter, 49 new properties with 6,891 rooms were added to Marriot's existing hotel portfolio. Currently, Marriott boasts as many as 4,127 lodging properties and timeshare resorts, comprising a total of nearly 702,000 rooms. Nearly 1,300 properties with over 225,000 rooms are either under construction or undergoing conversion to the company's brands.

Full-Year 2014 Earnings Guidance Upped

Marriott increased its earnings guidance for 2014. The company expects earnings per share in the range of $2.48 to $2.52, up 24% to 26% year over year. This includes 7 cents related to adjustments made in the second quarter. The company had earlier expected earnings in the range of $2.40 to $2.51 per share.

The company maintained its RevPAR guidance for 2014. The company expects both worldwide comparable system-wide RevPAR and comparable system-wide RevPAR in North America to increase in the range of 5% to 7%. It expects international system-wide RevPAR growth in the range of 4% to 6%.

The company expects total fee in the range of $1.71 to $1.72 billion, up 11% to 12% up year over year.

Fourth Quarter 2014 Guidance

For fourth-quarter 2014, earnings per share are estimated to be within 62 cents to 66 cents, up from the year-ago figure of 49 cents per share. The Zacks Consensus Estimate of 64 cents lies within the company guided range.

The company expects worldwide comparable system-wide RevPAR and comparable system-wide RevPAR in North America to increase in the range of 5% to 7%. International system-wide RevPAR is expected to increase in the range of 4% to 6%.

Marriot's total fee revenue is expected between $425 million and $435 million.

2015 Guidance

Management stated that currently, group bookings for 2015 are up at a mid-single digit rate. With an anticipated increase in demand in North America in 2015, the company expects both group and transient room rates to continue to strengthen. Therefore, the company expects worldwide comparable system-wide RevPAR and comparable system-wide RevPAR in North America to increase in the range of 5% to 7%. International system-wide RevPAR is expected to increase in the range of 4% to 6% in 2015.

Our Take

Marriott is progressing well on the back of a growing North American business, significant international exposure, an aggressive buyback strategy and increasing market share. The strong group booking trend worldwide is also a positive for the company.

Marriott presently has a Zacks Rank #2 (Buy). Other stocks that are worth considering in the hotel industry include Extended Stay America, Inc. (STAY), Choice Hotels International Inc. (CHH) and Marriott Vacations Worldwide Corp. (VAC). While Marriott Vacations Worldwide sports a Zacks Rank #1 (Strong Buy), Extended Stay America and Choice Hotels carry a Zacks Rank #2.

 


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