Marriott Int'l Posts Solid Q1 Earnings, Ups View - Analyst Blog

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Leading hotelier Marriott International Inc. ( MAR ) posted strong first quarter 2014 results with earnings and revenue beating the Zacks Consensus Estimate. The company also increased its financial outlook for 2014 based on the better-than-expected results.

Adjusted earnings of 55 cents beat the Zacks Consensus Estimate of 51 cents by 7.8% and went up 27.9% year over year. Also, earnings were above management's guidance range of 47 cents-52 cents per share. The upside reflects an increase in occupancy and room rates in North America.

Adjusted earnings exclude impairment charges and tax benefits.

Despite fewer days in the first quarter of 2014 compared to the year-ago period, revenues increased 4.8% year over year to $3.293 billion. The top-line also beat the Zacks Consensus Estimate of $3.290 billion by 0.09%. The top line was driven by an increase in revenues at all its segments and solid revenue per available room (RevPar) growth.

Marriott shifted its fiscal calendar starting first-quarter 2013. The company's first-quarter includes 90 days against 93 days in the year-ago period. The company did not restate the prior-year results.

Revenues in Detail

In the first quarter, base management and franchise fees increased 4.6% year over year to $318.0 million. The year-over-year increase was driven by higher RevPAR and non-room revenue, partially offset by lower fees due to the shift in Marriott's fiscal calendar.

Despite tough year over year comparisons, Incentive management fees moved up 7.6% to $71.0 million.

Total fee (base management and franchise fees + Incentive management fees) were $389.0 million and within management's expectation of $380.0 million to $395.0 million.

Owned, leased, corporate housing and other revenues, net of direct expenses, were up 8.9% year over year to $49.0 million driven by improved results at several leased hotels and revenue from a property the company acquired in the fourth quarter of 2013. These positives were however partially offset by lower termination and residential branding fees.

RevPAR & Margins

Group and transient demand exceeded management's expectation, thereby driving RevPar. Also, RevPar was helped by higher business group bookings as Easter fell in the second quarter of the year.

In the first quarter, RevPAR for worldwide comparable system-wide properties grew 6.2%, driven by a 3.2% rise in average daily rate (ADR). Comparable system-wide RevPAR in North America was up 6.3% driven by a 3.3% rise in ADR. Both metrics were above management's guidance of 4.0% to 6.0% increase.

International comparable system-wide RevPAR climbed 5.7%, above management's expectation of 3.0% to 5.0%.

Adjusted operating margin (cost reimbursement excluded) increased 400 basis points to 41.0% due to increased business travel that increased occupancy, thereby improving revenue. Increase in total expenses was easily offset by the increase in revenue.

Update on Hotel Rooms

During the first quarter, 32 properties with 5,855 guestrooms were added to Marriot's existing hotel portfolio. The company also divested 14 properties. Currently, Marriott boasts as many as 3,934 lodging properties and timeshare resorts, comprising a total of nearly 680,000 rooms. Nearly 1,200 properties with over 200,000 rooms are either under construction or undergoing conversion to the company's brands. However, this does not include approximately 10,148 rooms associated with the Protea transaction.

Full-Year 2014 Guidance Upped

Marriott has increased its financial outlook for 2014 driven by its strong development pipeline, which would help it to gain market share in the hospitality industry, thus boosting its business.

The company expects earnings per share in the range of $2.39 to $2.53, (up 20.0% to 27.0% year over year) compared with the prior expectation of $2.29 to $2.45 per share. The Zacks Consensus Estimate of $2.41 lies within the guidance range.

In 2014, the company expects total fee revenue in the range of $1,665.0 million to $1,705.0 million, (up 8.0% to 11.0% year over year) higher than the prior range of $1,650.0 million to $1,700.0 million.

The company expects both worldwide comparable system-wide RevPAR and comparable system-wide RevPAR in North America to increase in the range of 4.5% to 6.5%, up from the previous range of 4.0% to 6.0%. System-wide RevPAR is expected to increase in the range of 4.0% to 6.0% internationally compared with the previous range of 3.0% to 5.0%.

Second-Quarter 2014 Guidance

For second-quarter 2014, earnings per share are estimated to be within 63 cents to 68 cents, up from the year-ago figure of 57 cents per share. The Zacks Consensus Estimate of 67 cents lies within the guidance range.

Marriot's total fee revenue is expected between $440.0 million and $450.0 million.

The company expects worldwide comparable system-wide RevPAR and comparable system-wide RevPAR in North America and internationally to increase in the range of 4.0% to 6.0% in the second quarter of 2014.

The company expects operating income within the range of $300.0 million-$320.0 million.

Our Take

Marriott posted solid results in the first quarter of 2014. The company 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 in North America is also a positive for the company.

Another leading hotelier Starwood Hotels & Resorts Worldwide Inc. ( HOT ) also posted better than expected first-quarter 2014 results last week.

Marriott presently has a Zacks Rank #3 (Hold). Some better ranked stocks in the restaurant industry include Hyatt Hotels Corporation ( H ) and Marriott Vacations Worldwide Corp. ( VAC ) both carrying a Zacks Rank #2 (Buy).




HYATT HOTELS CP (H): Free Stock Analysis Report

STARWOOD HOTELS (HOT): Free Stock Analysis Report

MARRIOTT INTL-A (MAR): Free Stock Analysis Report

MARRIOT VAC WW (VAC): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: H , HOT , MAR , VAC

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