Marriott International Inc.
(
MAR
) reported first quarter 2012 earnings of 30 cents per share,
beating the Zacks Consensus Estimate by a penny. Moreover,
quarterly earnings were 30% higher than the year-ago quarter
adjusted earnings of 23 cents per share.
On a reported basis, earnings per share were 30 cents versus 26
cents in the year-ago quarter. Reported earnings include the
adjustment for timeshare spin-off.
Total revenue was $2,552 million in the reported quarter versus
$2440 million in the prior-year quarter.
Inside the Headline Numbers
Base management fees rose 3% year over year to $124 million
while franchise fees increased 8% year over year to $126 million,
attributable to higher revenue per available room (RevPAR) at
existing hotels. Incentive management fees jumped 19% year over
year to $50 million. Owned, leased, corporate housing and other
revenues fell 3% to $217 million.
RevPAR for worldwide comparable system-wide properties grew 6.8%
during the quarter. International comparable system-wide RevPAR
climbed 5.9% year over year with a 2.7% increase in average daily
rate.
In North America, comparable system-wide RevPAR leaped 6.9%,
with the average daily rate up 3.6%. RevPAR for comparable
company-operated North American full-service and luxury hotels
escalated 7.1%, driven by a 3.5% rise in average daily rate. RevPAR
for comparable company-operated North American limited service
hotels grew 6.7%, driven by a 3.6% upside in average daily
rate.
Update on Hotel Rooms
During the quarter, Marriott added 24 new properties and
divested 10 properties. At the end of the first quarter, Marriott's
pipeline of hotels under construction awaiting conversion or
approved for development totaled approximately 700 properties with
over 115,000 rooms. The company expects to open approximately
25,000 to 30,000 rooms and divest 7,000 to 8000 rooms in 2012.
Financials
At the end of the first quarter, total debt was $2,527.0 million
while cash balances totaled $290 million, compared with $2,171
million of debt and $102 million of cash at the end of 2011,
respectively.
During the quarter, the company issued $600 million of Series K
bonds due 2019 and expects to utilize the proceeds for general
corporate purposes. In the reported quarter, the company
repurchased 4.2 million shares for $150 million.
Guidance
For the second quarter, the company estimates that system-wide
REVPAR will increase in the range of 6% to 8% in North America,
outside North America and worldwide.
The company expects total fee revenue between $345 million and
$355 million and earnings per share between 39 cents and 43 cents
in the second quarter of 2012.
The company also raised its outlook for 2012. The company now
projects comparable system-wide REVPAR on a constant dollar basis
to increase 6% to 8% across all the operational regions versus
previous estimation of 5% to 7%.
For 2012, Marriott forecasts fee revenue in the range of $1,425
million to $1,465 million compared with the earlier projection of
$1,410 million to $1,450 million. Earnings per share projection are
raised from $1.52 - $1.64 to $1.58 - $1.69.
Our Take
We expect estimates to go up in the coming days, based on
better-than-expected first quarter 2012 results and raised outlook
for 2012. The lodging company continues to benefit from increased
demand with group business also gaining momentum and favorable
pricing. We believe Marriott's strong pipeline, solid balance sheet
and lower operating cost structure augur well for its business.
However, in the near term, the company's business in Europe will
remain soft due to the prevailing economic uncertainties.
Marriott, which competes with the likes of
Intercontinental Hotels Group Plc.
(
IHG
) and
Starwood Hotels & Resorts Worldwide Inc
. (
HOT
), currently retains a Zacks #3 Rank, which translates into a
short-term Hold rating. We are also maintaining our long-term
Neutral recommendation on the stock.
STARWOOD HOTELS (
HOT
): Free Stock Analysis Report
INTERCONTL HTLS (
IHG
): Free Stock Analysis Report
MARRIOTT INTL-A (
MAR
): Free Stock Analysis Report
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