Marriott (MAR) Stock Falls Despite Q2 Earnings & Sales Beat
Zacks Investment Research | Aug 07, 2017 09:23PM ET
Marriott International Inc. (NASDAQ:MAR) posted better-than-expected second-quarter 2017 results wherein both the bottom line and the top line beat the Zacks Consensus Estimate.
However, the company’s shares dropped 3% in afterhours trading on Aug 7, mirroring investor concerns surrounding weak earnings guidance for third-quarter 2017.
We note that on Sep 23, 2016, Marriott had completed its acquisition of Starwood Hotels & Resorts Worldwide (NYSE:HOT) Inc. and became the world's largest hotel company.
Earnings and Revenue Discussion
Adjusted earnings per share (EPS) of $1.13 per share surpassed the Zacks Consensus Estimate of $1.02 by 10.8%. Also, the figure witnessed a 34.5% increase from combined adjusted EPS of 84 cents in the year-ago quarter. In fact, the bottom line came above management’s guided range of 99 cents to $1.03.
Notably, combined second-quarter 2016 results assume Marriott's acquisition of Starwood and Starwood's sale of its timeshare business that completed on Jan 1, 2015 along with some other adjustments.
Total revenue almost remained flat year over year at nearly $5.80 billion but topped the Zacks Consensus Estimate of $5.12 billion by over 13%.
Excluding the impact of Marriott's acquisition of Starwood and Starwood's sale of its timeshare business on second-quarter 2016 results, the top line in the quarter increased a significant 48.5% year over year. This, in turn, reflects the positive impact of Starwood acquisition on second-quarter 2017 revenues.
RevPAR & Margins
In the quarter, revenue per available room (RevPAR) for worldwide comparable system-wide properties increased 2.2% in constant dollar (up 1.4% in actual dollars), driven by 0.7% growth in occupancy and a 1.2% rise in average daily rate (ADR). In fact, the reported figure came within management’s guided range of an increase of 1% to 3% on a constant dollar basis.
Comparable system-wide RevPAR in North America grew 0.9% in constant dollars (up 0.8% in actual dollars). Though occupancy rate declined 0.3%, ADR witnessed an increase of 1.3%. Management had expected the same to be flat to up 2% for the quarter.
In constant dollar, international comparable system-wide RevPAR rose 5.8% (up 3.1% in actual dollars) in the second quarter of 2017. Both occupancy rate and ADR witnessed a rise of 3.1% and 1.1%, respectively. Also, the figure came above management’s guided range of a rise of 3% to 5% on a constant-dollar basis.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) was $834 million, up 8% year over year, from combined adjusted EBITDA in the year-ago quarter.
Worldwide comparable company-operated house profit margin increased 50 basis points (bps) in the reported quarter. The uptick can be attributable to higher RevPAR and synergies from the Starwood acquisition, including procurement savings. However, North American comparable company-operated house profit margins decreased 10 bps. Meanwhile, house profit margins for comparable company-operated properties outside North America rose 140 bps.
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Total adjusted expenses decreased 1.4% year over year to $5.15 billion mainly due to lower general, administrative and other expenses.
General, administrative, and other expenses were $226 million, down 8.5% from the year-ago quarter, primarily due to general administrative cost savings. Notably, the figure was just above the management’s expected range of $220 million to $225 million.
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