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Why Is Marriott (MAR) Up 2.8% Since Last Earnings Report?

·4-min read

It has been about a month since the last earnings report for Marriott International (MAR). Shares have added about 2.8% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Marriott due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Marriott Q1 Earnings Beat Estimates, Revenues Miss

Marriott reported mixed first-quarter 2021 results, wherein earnings beat the Zacks Consensus Estimate but revenues missed the same. Notably, both the top and bottom lines declined sharply on a year-over-year basis. Revenues missed the consensus estimate for the third straight quarter.

In the quarter under review, Marriott’s adjusted earnings per share was 10 cents, which surpassed the Zacks Consensus Estimate of 3 cents. In the prior-year quarter, the company had reported adjusted earnings of 49 cents per share. Although the coronavirus pandemic continues to hurt the company’s results, it is witnessing rise in demand globally albeit at varying rates. The company stated Mainland China is leading the global recovery, where occupancy is near the pre-pandemic level.
 
Quarterly revenues of $2,316 million missed the consensus mark of $2,498 million. Moreover, the top line declined 51% on a year-over-year basis. Base management and Franchise fee were $106 million and $306 million, down 50% and 26% year over year, respectively.

Tony Capuano, CEO said: “In our largest region, the U.S. & Canada, demand increased rapidly as vaccine rollouts accelerated. Occupancy started the year at 33 percent in January and reached 49 percent by March. Leisure demand gained momentum, particularly in ski and beach resort destinations."

RevPAR & Margins

In the quarter under review, revenue per available room (RevPAR) for worldwide comparable system-wide properties fell 59.1% in constant dollars due to 30.4% and 26.2% decline in occupancy and average daily rate (ADR), respectively. These metrics were impacted by the coronavirus pandemic.

Comparable system-wide RevPAR in Asia Pacific (excluding China) fell 68.3% in constant dollars due to 37.3% and 37.3% decline in ADR and occupancy, respectively. Comparable system-wide RevPAR in Greater China plunged 37.9%.

On a constant-dollar basis, international comparable system-wide RevPAR fell 64.1% due to decline of 34.4% and 25% in occupancy and ADR, respectively. Moreover, comparable system-wide RevPAR in Europe and America declined 85.8% and 65.9%, respectively.

Total expenses fell 51% year over year to $2,232 million, primarily due to decline in Reimbursed expenses.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) amounted to $296 million, down 33% year over year.

Balance sheet

At the end of the first quarter, Marriott's total debt amounted to $9.6 billion, compared with $9.5 billion in December 2020. The company’s net liquidity at the end of quarter was nearly $4.7 billion.

Due to uncertainty surrounding the crisis, the company temporarily suspended its share repurchase programs and dividend payouts.

Unit Developments

At the end of first-quarter 2021, Marriott's development pipeline totaled nearly 2,825 hotels, with approximately 491,000 rooms. Further, nearly 222,000 rooms were under construction.

During the quarter, the company added 134 new properties (23,567 rooms) to its worldwide lodging portfolio.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 45.81% due to these changes.

VGM Scores

Currently, Marriott has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Marriott has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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