Marriott International Inc.
) reported second quarter 2012 earnings of 42 cents per share, in
line with the Zacks Consensus Estimate. However, earnings in the
reported quarter were 24% higher than the year-ago quarter adjusted
earnings of 34 cents per share.
Total revenue was $2,776 million in the second quarter, up 7% year
over year from $2,605 million, but lagged the Zacks Consensus
Estimate of $2,831 million by 2%.
Inside the Headline Numbers
Base management fees rose 4% year over year to $141 million while
franchise fees increased 7% year over year to $145 million,
attributable to higher revenue per available room (RevPAR) at
existing hotels and fees from new hotels. Incentive management fees
jumped 12% year over year to $56 million. Owned, leased, corporate
housing and other revenues climbed 6% to $264 million.
RevPAR for worldwide comparable system-wide properties grew 6.7%
during the quarter. International comparable system-wide RevPAR
climbed 7.2% year over year with a 3.0% increase in average daily
In North America, comparable system-wide RevPAR leaped 6.5%, with
the average daily rate up 4.3%. RevPAR for comparable
company-operated North American full-service and luxury hotels
escalated 6.4%, driven by a 3.9% rise in average daily rate. RevPAR
for comparable company-operated North American limited service
hotels grew 6.7%, driven by a 4.5% upside in average daily rate.
Update on Hotel Rooms
During the quarter, Marriott added 29 new properties and divested
13 properties. At the end of the second 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 now expects to open approximately 20,000 to 25,000
rooms in 2012, down from the previous estimate of 25,000 to 30,000
rooms, due to some delays in new hotel construction in the Middle
East, Asia and Mexico.
At the end of the second quarter, total debt was $2,560 million and
cash balances totaled $105 million compared with $2,171 million of
debt and $102 million of cash at the end of 2011, respectively.
In the reported quarter, the company repurchased 10.5 million
shares for $400 million. As of June 15, 2012, Marriott had 25.8
million shares remaining under its repurchase authorization.
For the third quarter, the company estimates that comparable
system-wide REVPAR will increase in the range of 6% to 8% in North
America, 5% to 7% outside North America and 6% to 8% worldwide.
The company expects total fee revenue between $315 million and $325
million and earnings per share between 39 cents and 41 cents in the
third quarter of 2012.
The company continues to expect full year 2012 comparable
system-wide REVPAR on a constant dollar basis to increase 6% to 8%,
in North America and worldwide. However, the company has trimmed
the comparable system-wide REVPAR growth outside North America to
5% to 7% from 6% to 8%, owing to the poor demand in the Middle East
and Asia market, particularly for high-end hotels.
For 2012, Marriott forecasts fee revenue in the range of $1,410
million to $1,440 million, down from the earlier projection of
$1,425 million to $1,465 million. The reduction in fee revenue was
based on the unfavorable foreign exchange rate, the sale of the
corporate housing business, some deferred hotel openings and lower
REVPAR growth in some international markets.
However, earnings per share projection for 2012 has been raised
from $1.58-$1.69 to $1.65-$1.75.
We believe that Marriott's strong pipeline, significant
international exposure, solid balance sheet, aggressive buyback
strategy, lower operating cost structure and increased market share
augur well for its earnings. The company is also experiencing
strong group bookings in North America. Group business momentum
continues, as the bookings for group business is up over 10% for
the second half of 2012 and 8% for 2013.
However, in the near term, the company's business in some
international markets like Middle East and Asia remains soft.
Moreover, stiff competition from the major hotel chains and
independent companies in the regional markets further add to the
STARWOOD HOTELS (HOT): Free Stock Analysis
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MARRIOTT INTL-A (MAR): Free Stock Analysis
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Marriott, which competes with the likes of
Intercontinental Hotels Group Plc.
Starwood Hotels & Resorts Worldwide Inc.
), currently retains a Zacks #2 Rank, which translates into a
short-term Buy rating. We are also maintaining our long-term
Outperform recommendation on the stock.