We reiterate our Outperform recommendation on leading worldwide
hospitality company
Marriott International Inc.
(
MAR
).
The company reported first quarter 2012 earnings of 30 cents per
share, which surpassed the Zacks Consensus Estimate by a penny and
year-ago quarter adjusted earnings by 30%. Total revenue was $2,552
million, up 4.6% from the year-ago quarter. RevPAR for worldwide
comparable system-wide properties grew 6.8% during the quarter.
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.
Marriott has a substantial development pipeline and is poised to
benefit from the increase in demand for hotels going forward. As
the demand for hotels particularly in the international market is
increasing, Marriott should benefit from its global exposure.
Global travel is rising continuously with significant tourism from
Brazil and China.
In the first quarter, Marriott witnessed strong demand in the
Caribbean, Latin America and Asia. Business in Japan is also
bouncing back, as local demand is strengthening. The company's
worldwide development pipeline has increased to 115,000 rooms at
the end of the first quarter, up 5,000 sequentially.
The hotelier also expects fiscal 2012 to be promising as strong
demand and pricing continue.The company is making efforts to
increase the room rates by reducing discounting and improving the
mix. Moreover, moderate supply growth in North America will help to
raise the price higher.
Group business momentum continues, as group revenue climbed 6%
in the first quarter of 2012. Additionally, in the first quarter,
the bookings for group business for the remainder of 2012 is up
over 11% as compared to 2% in the year-ago period, driven by solid
group demand and marvelous performance of new North American sales
organization.
Transient business was also strong in the quarter. Revenue
from special corporate guests increased over 9% in the quarter,
with increasing room rates. Smaller hotel group bookings for fiscal
2012 are up in the double digit, whereas for larger hotels, group
booking is up high-single digits.
Marriott's recent agreement to take over the Gaylord brand and
hotel management company for an upfront payment of $210 million in
cash by October 2012 also remains strategically sound. Upon
execution of the deal, Gaylord will retain its existing properties
while Marriott will take over their management under long-term
agreements for 35 years.
Marriott's management anticipates to earn an incentive fee in
its first full year of services, and the transaction to be
accretive to Marriott's earnings per share by approximately 2 cents
per share in 2013.
We are also encouraged by the company's solid balance sheet,
aggressive buyback strategy, lower operating cost structure and
increased market share. The company also recently hiked its
quarterly dividend by 30%. Moreover, divestiture of the
timeshare business is promising, as Marriott is able to concentrate
on its core hotel management and franchise business.
Additionally, European RevPAR trends improved to 3.0% in the
first quarter, driven by strength in gateway cities. For 2012,
management is forecasting modest RevPAR growth of 2%-3% for the
region driven by Olympics in London, a strong Paris convention
calendar and Euro 2012 soccer championship in Warsaw.
Zacks Consensus Estimates Increased
Over the last 30 days, one and four out of 19 analysts have
raised the estimates for 2012 and 2013. None of the analysts have
moved in the opposite direction.
The Zacks Consensus Estimate for fiscal 2012 remains unchanged
at $1.65, but has jumped by 2 cents to $2.01 for 2013, over the
last 30 days.
MARRIOTT INTL-A (MAR): Free Stock Analysis
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