Marriott International Inc.
) second-quarter 2013 earnings of 57 cents per share were in line
with the Zacks Consensus Estimate but beat the year-ago level of
42 cents by 35.7%. Earnings were also within management's
guidance range of 55 cents-59 cents per share. The year-over-year
rise in the earnings were led by the company's higher top line,
margin expansion and lower share count from share buyback
Total revenue in the second quarter was $3.26 billion, up 18%
year over year and also better than the Zacks Consensus Estimate
of $3.23 billion by nearly 1%. Marriott's growing North American
business and continued expansion of its lodging properties helped
drive revenues during the quarter. Additionally, Marriott gained
from the rise in the fee revenues at its managed and franchised
Marriott has shifted its fiscal calendar starting in 2013. Now
the company's second-quarter includes the period within Apr 1,
2013 - Jun 30, 2013 (91 days) as compared with the year-ago
period of Mar 24, 2012 - Jun 15, 2012 (84 days).
Revenue in Detail
In the second quarter,
base management and franchise fees
increased 19.9% year over year to $343 million. The rise was
mostly due to the shift in Marriott's fiscal calendar, which
added $24 million to its quarterly revenues. Along with these,
increased revenue per available room (RevPAR) growth in the
existing properties and higher fees earned from the company's
newly launched hotels also boosted the base management and
franchise fees during the quarter.
Incentive management fees
increased 14% year over year to $64 million, benefiting from the
company's calendar change and higher occupancy rates.
Owned, leased, corporate housing and other revenues, net
of direct expenses,
were down 16.4% to $51 million due to a decline in the
residential branding fees as well as corporate housing revenues
and higher termination fees. Poor performance at some of the
leased properties at the international locations also affected
RevPAR & Margins
In the second quarter, RevPAR for worldwide comparable
system-wide properties grew 4.7%, driven by a 3.2% rise in the
average daily rate (ADR). Following a 3.9% rise in the ADR,
comparable system-wide RevPAR in North America were up 5.2%.
Marriott has benefited from low supply growth in North America,
given an increased demand scenario in both the business and
leisure channels. However, the company has witnessed a decline in
group booking during the quarter. International comparable
systemwide RevPAR climbed 2.8% with the rise in ADR and
Adjusted operating margin in the quarter expanded 300 basis
points to 43% driven by higher top line and better pricing.
Update on Hotel Rooms
During the second quarter, 43 properties with 6,203 guestrooms
were added to Marriot's existing hotel portfolio. The company
also divested 18 properties. Currently, Marriott boasts as many
as 3,847 lodging properties and 663,000 timeshare resorts. Nearly
850 properties with over 140,000 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 7.0 million
shares worth $288 million. At the end of the quarter, nearly 21.4
million shares were left to be purchased under the current share
In 2013, Marriot is expecting to return $800 million to
shareholders through share repurchase and dividend.
Q3 and FY13 Guidance
, earnings per share are estimated to be within 42 cents and 46
cents. Marriot's total fee revenue is expected between $370
million and $380 million. The company projects operating income
within the $215 million and $235 million range gaining from the
shift in the company's fiscal calendar.
The company estimates that North American comparable
system-wide RevPAR will be up 4% to 6%, whereas the same will be
flat to up 2% outside North America. Moreover, worldwide
comparable system-wide RevPAR is expected to increase between 3%
Marriott lowered its guidance for
full year 2013
. The company decreased the higher end of its fee revenue
guidance to $1.56 billion from $1.58 billion. In 2013, the fee
revenues are now expected to be within $1.53 billion to $1.56
billion, up 7%-10% year over year.
For 2013, the company also trimmed its RevPAR outlook.
Marriott now projects comparable system-wide RevPAR in North
America within 4.5% to 6% versus its previous estimates of 4.5%
to 7%. The same is projected to be 2% to 4% outside North
America, lower than the prior guidance of 3% to 5%. Worldwide
comp growth is expected to be 4% - 6%, down from 4% - 7%.
Management expects owned, leased, corporate housing and other
revenues, net of expenses to decline 3% to 9% to $150 million -
$160 million in 2013 owing to a host of issues. Firstly,
properties in London are likely to face tough year-over-year
comparisons due to the Olympics held last year. Secondly, the
renovation of two leased properties in 2013 will mar consolidated
results. Finally, lower residential branding fees and higher
pre-opening costs are likely to hurt the company's financials in
Operating income is expected to be within the range of $970
million to $1,025 million, down from the prior guidance of $990
million to $1,060 million. Keeping these factors in mind,
Marriott has also reduced its earnings guidance. For 2013,
earnings per share are expected in the range of $1.92 - $2.03,
down from the previous estimate of $1.93 - $2.08.
Although Marriott has posted double-digit top-line growth and
higher earnings in the past three quarters, a lowered guidance
for 2013 remain a major cause of concern. We believe that
sluggish group booking demand and reduced government spending on
travel will hurt the company's financials in 2013. Moreover, the
weak economic conditions in Europe and the slowdown in China
continue to be headwinds.
A leading hospitality company,
Starwood Hotels & Resorts Worldwide Inc.
) earnings in the second quarter beat the Zacks Consensus
Estimate but its revenues missed the same. Another hotelier,
Wyndham Worldwide Corporation
), surpassed the Zacks Consensus Estimate for both earnings and
revenues in the second quarter.
Marriott currently holds a Zacks Rank #4 (Sell). Another
hotelier, which is worth considering at the moment, is
Home Inns & Hotels Management Inc.
) carrying a Zacks Rank #1 (Strong Buy). Home Inns & Hotels
is expected to report its second quarter earnings on Aug 12.
HOME INNS&HOTEL (HMIN): Free Stock Analysis
STARWOOD HOTELS (HOT): Free Stock Analysis
MARRIOTT INTL-A (MAR): Free Stock Analysis
WYNDHAM WORLDWD (WYN): Free Stock Analysis
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