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Robust Occupancy Aids Marriott Vacations (VAC), Cost Woes Stay

Marriott Vacations Worldwide Corporation VAC is benefiting from robust occupancies and increase in contract sales. Solid demand in the ski, beach and golf markets is driving its performance. The company's focus on digitization bodes well.

On the flip side, high expenses continue to hurt VAC’s performance.  The stock has declined 10.1% in the past year against the industry’s growth of 7.1%. In the past month, Marriott Vacations’ shares have increased 3% compared with 0.5% growth of the industry it belongs to.

The Zacks Rank #3 (Hold) company’s 2023 sales and earnings are likely to witness growth of 6.9% and 8.8% year over year, respectively. In the past 30 days, earnings estimates for 2023 have witnessed upward revisions of 1.4%.

Factors Likely to Drive Growth

Marriott Vacations has been witnessing improvement in occupancy rates, thereby highlighting people’s willingness to go on vacations. During first-quarter 2023, it reported solid occupancies (90%) with respect to its Vacation Ownership business. The upside was backed by solid demand in ski, beach and golf markets.

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VAC reported strong recovery in the Asia-Pacific region with occupancy improving 30 basis points year over year. Much optimism prevails as it noted increasing demand among customers to resume travel.

Marriott Vacations continues to witness robust recovery during first-quarter 2023. While occupancies and tours are witnessing growth in the first quarter, VPGs remain well above the 2019 levels.

The company benefits from its development and rental businesses. VAC reported contract sales of $434 million in first-quarter 2023, up 10% from $394 million reported in the prior-year quarter. Given the rise in tours coupled with strength in vacation ownership products, it anticipates contract sales to grow in the range of 5-9% year over year in 2023.

VAC is also focusing on sales building efforts to drive growth. It continues to make solid progress with respect to the integration of Welk into its high vacation ownership business. In 2023, it intends to rebrand all legacy Welk Resorts into Hyatt Vacation Club.

Also, Marriott Vacations stated plans to expand its vacation offerings with the launch of the Beyond program. The initiative allows owners to exchange their stays for cruises, tours and hotel accommodations.

 

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

 

Concerns

Despite cost synergies from the ILG acquisition, the company has been bearing the brunt of steep expenses. During first-quarter 2023, total expenses increased 11.4% year over year to $1,015 million from $911 million reported in the year-ago quarter. Escalated marketing and sales expenses, and rental cost affected total costs. The company anticipates the inflationary environment to affect margins for some time.

Key Picks

Here we present some better-ranked stocks from the Zacks Consumer Discretionary sector.

Royal Caribbean Cruises Ltd. RCL currently sports a Zacks Rank #1 (Strong Buy). RCL has a trailing four-quarter earnings surprise of 26.4%, on average. The stock has increased 61.9% in the past six months. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for RCL’s 2023 sales and earnings per share (EPS) indicates growth of 48.3% and 160.5%, respectively, from the year-ago period’s levels.

Skechers U.S.A., Inc. SKX presently flaunts a Zacks Rank #1. SKX has a trailing four-quarter earnings surprise of 18.8%, on average. The stock has improved 31% in the past year.

The Zacks Consensus Estimate for SKX’s 2023 sales and EPS indicates gains of 7.8% and 31.9%, respectively, from the year-ago period’s levels.

Crocs, Inc. CROX currently carries a Zacks Rank #2 (Buy). CROX has a trailing four-quarter earnings surprise of 19.6%, on average. The stock has gained 27.8% in the past six months.

The Zacks Consensus Estimate for CROX’s 2023 sales and EPS indicates increases of 13.2% and 5.7%, respectively, from the year-ago period’s levels.

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Skechers U.S.A., Inc. (SKX) : Free Stock Analysis Report

Crocs, Inc. (CROX) : Free Stock Analysis Report

Marriot Vacations Worldwide Corporation (VAC) : Free Stock Analysis Report

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Zacks Investment Research