Marriott International Inc.
) third-quarter 2013 earnings of 52 cents per share beat the
Zacks Consensus Estimate of 45 cents by 15.6% and the year-ago
level of 44 cents by 18.2%. Earnings were also ahead of
management's guidance range of 42 cents-46 cents per share.
Earnings in the quarter received a boost from the company's
higher top line and lower share count from share buyback
Total revenue in the third quarter was $3.16 billion, up 15.8%
year over year and also ahead of the Zacks Consensus Estimate of
$3.06 billion by nearly 3.3%. The upside was led by higher
pricing, a 75% increase in worldwide occupancy and a 5% rise in
worldwide revenue per available room (RevPAR). Additionally, the
company benefited from the solid group booking business in North
America and rise in the fee revenues at its managed and
Marriott has shifted its fiscal calendar starting
first-quarter 2013. Now the company's third-quarter includes the
period within Jul 1, 2013-Sep 30, 2013 (92 days) as compared with
the year-ago period of Jun 16, 2012-Sep 7, 2012 (84 days). The
company did not restate the prior-year results.
Revenues in Detail
In the third quarter,
base management and franchise fees
increased 14.8% year over year to $325 million. The rise was
mostly due to the shift in Marriott's fiscal calendar, which
added $25 million to its quarterly revenues. Along with these,
solid RevPAR growth in the existing properties, higher fees
earned from the company's newly launched hotels and increased
relicensing fees aided the base management and franchise fees
during the quarter.
Incentive management fees
increased 47% year over year to $53 million, benefiting from the
company's calendar change and higher fees earned from the New
York and Boston market, offsetting weak performance in
Washington, DC and Egypt.
Owned, leased, corporate housing and other revenues, net
of direct expenses,
were up 30.8% year over year to $34 million with the rise in the
termination fees and higher fees earned from the leased
RevPAR & Margins
In the third quarter, RevPAR for worldwide comparable
system-wide properties grew 4.8%, driven by 3.4% rise in the
average daily rate (ADR). Comparable system-wide RevPAR in North
America were up 5.2%, driven by a 3.9% rise in the ADR. Marriott
has benefited from low supply growth in North America, given an
increased demand scenario in both the business and leisure
channels. Marriott has also witnessed a rise in group business
during the quarter. International comparable system-wide RevPAR
climbed 3.4% with the rise in ADR and occupancy.
Adjusted operating margin (cost reimbursement excluded)
remained flat year over year at 41% as the rise in revenues was
offset by higher costs.
Update on Hotel Rooms
During the second quarter, 44 properties with 6,580 guestrooms
were added to Marriot's existing hotel portfolio. The company
also divested eight properties. Currently, Marriott boasts as
many as 3,900 lodging properties and 670,507 timeshare resorts.
Nearly 850 properties with over 144,000 rooms are either under
development or already under construction or undergoing
conversion to the company's brands, mostly at international
In the reported quarter, the company bought back 3.2 million
shares worth $129 million. At the end of the quarter, nearly 17.6
million shares were left to be purchased under the current share
Fourth-Quarter 2013 Guidance
, earnings per share are estimated to be within 47 cents to 50
cents. Marriot's total fee revenue is expected between $370
million to $380 million.
The company expects its operating income within the range of
$235 million-$250 million, lower than the year-ago level of $309
million. The decline in the operating profit is expected to be
mostly due to the shift in the company's fiscal calendar which
will lead to a shorter fourth quarter. Fourth-quarter 2013 will
now have 92 days compared to 112 days in the year-ago quarter.
Further, the government shutdown in the U.S. in early October and
slow international RevPAR growth will also hurt operating income
The company estimates that North American comparable
system-wide RevPAR will be up 4.5% to 5.5%, whereas the same will
be up 1%-2% outside North America. The government shutdown in
October is expected to hurt the North American RevPAR by 1% in
the fourth quarter.
Full-Year 2013 Outlook
Marriott tightened its earnings guidance for
. Earnings per share are now expected in the range of $1.98-$2.01
as compared with the previous estimate of $1.92-$2.03.
The company decreased the higher end of its fee revenue
guidance to $1.54 billion from $1.56 billion. In 2013, the fee
revenues are now expected to be within $1.53 billion-$1.54
Marriott continues to project that its comparable system-wide
RevPAR in North America will be within 4.5% to 6%. The same is
projected to be in the range of 2% to 4% outside North America.
Worldwide comp growth is expected to be within 4%-6%.
Management expects owned, leased, corporate housing and other
revenues, net of expenses to be $161 million, up from the prior
estimates of $150 million-$160 million in 2013. The company
raised the revenue guidance after witnessing solid performance in
several owned and leased properties.
The company has also trimmed its guidance for operating income
due to lower operating income in the fourth quarter. It is
expected to be within the range of $985 million to $1,000 million
versus the prior guidance of $970 million to $1,025 million.
The company reported better-than-expected results on the back
of growing North American business, significant international
exposure, aggressive buyback strategy and increased market share.
The strong group booking trend in North America is also positive
for the company. Additionally, Marriott's focus on the
upper-moderate and economy segments will boost its business,
Marriott holds a Zacks Rank #2 (Buy). Some other hoteliers
that are currently performing well include
Choice Hotels International Inc.
Starwood Hotels & Resorts Worldwide Inc.
Wyndham Worldwide Corporation
). All these companies carry a Zacks Rank #2.
CHOICE HTL INTL (CHH): Free Stock Analysis
STARWOOD HOTELS (HOT): Free Stock Analysis
MARRIOTT INTL-A (MAR): Free Stock Analysis
WYNDHAM WORLDWD (WYN): Free Stock Analysis
To read this article on Zacks.com click here.