Why Is Marriott (MAR) Down 12.3% Since Last Earnings Report?
A month has gone by since the last earnings report for Marriott International (MAR). Shares have lost about 12.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Marriott due for a breakout? 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 Q4 Earnings & Revenues Top Estimates, Rise Y/Y
Marriott reported impressive fourth-quarter 2022 results, with earnings and revenues surpassing the Zacks Consensus Estimate. The top and the bottom line increased on a year-over-year basis.
During the quarter, the company reported improvements in revenue per available room (RevPAR), occupancy and average daily rate (ADR) on account of solid leisure demand and recovery in business transient and group demand. It also stated benefits from its fee-driven, asset-light business model and price strength. With global trends improving, the company expects the growth momentum to continue in the upcoming periods as well.
Earnings & Revenue Discussion
In the quarter under review, Marriott’s adjusted earnings per share (EPS) were $1.96, surpassing the Zacks Consensus Estimate of $1.84. In the prior-year quarter, the company reported adjusted earnings of $1.30 per share.
Quarterly revenues of $5,923 million surpassed the consensus mark of $5,614 million. The top line surged 33.2% on a year-over-year basis. During the quarter, revenues from Base management and Franchise fee came in at $287 million and $658 million compared with $217 million and $520 million reported in the prior-year quarter. The upside was primarily backed by strength in lodging demand and unit growth. During the quarter, other non-RevPAR-related franchise fees came in at $215 million compared with $186 million reported in the year-ago quarter. The upside was primarily driven by solid contributions from co-brand credit card fees.
RevPAR & Margins
In the quarter under review, RevPAR for worldwide comparable system-wide properties increased 4.6% (in constant dollars) compared with 2019 levels. The upside was primarily backed by a 12.8% increase in ADR from 2019 levels. However, occupancy declined 5.1% from 2019 levels.
Comparable system-wide RevPAR in the Asia Pacific (excluding China) increased 5.5% (in constant dollars) from 2019 levels. Occupancy declined 4.8% from 2019 levels, but ADR inched up 12.8% from 2019 levels. Comparable system-wide RevPAR in Greater China fell 42.3% from 2019 levels.
On a constant-dollar basis, international comparable system-wide RevPAR increased 3.4% from 2019 levels. Occupancy declined 8.3% from 2019 levels. However, ADR was up 17.3% from 2019 levels. Comparable system-wide RevPAR in Europe increased 7.4%, while RevPAR in the Caribbean & Latin America increased 27.6% from 2019 levels.
Total expenses during the quarter increased 29.3% year over year to $4,927 million, primarily owing to a rise in Reimbursed expenses.
During the fourth quarter, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) amounted to $1,090 million compared with $741 million reported in the prior-year quarter.
At the end of the fourth quarter, Marriott's total debt amounted to $10.1 billion compared with $8.4 billion reported in the previous quarter. Cash and cash equivalents, as of Dec 31, 2022, came in at $0.5 billion compared with $1 billion reported in the previous quarter.
Year to date (through Feb 10, 2023), the company repurchased 2.5 million shares of its common stock worth approximately $400 million.
At the end of fourth-quarter 2022, Marriott's development pipeline totaled 3,028 hotels, with approximately 496,000 rooms. Nearly 199,000 rooms were under construction.
During the quarter, the company added 145 new properties (22,589 rooms) to its worldwide lodging portfolio. For 2023, the company anticipates net room growth in the range of 4-4.5% year over year.
For first-quarter 2023, the company anticipates gross fee revenues in the range of $1,045-$1,065 million. Adjusted EBITDA is expected to be between $980 million and $1,005 million. The company expects first-quarter diluted earnings per share (EPS) to be between $1.82 and $1.88.
For the first quarter, the company anticipates worldwide system-wide RevPAR to increase 30-32% growth from 2022 levels. RevPAR in the United States and Canada is expected to increase 25-27% from 2022 levels. Meanwhile, international RevPAR is expected to lie in the range of 47-49% from 2022 levels.
For 2023, the company anticipates gross fee revenues in the range of $ $4,325-$4,555 million. General and administrative expenses for 2023 are projected to be between $935 million and $915 million. Adjusted EBITDA is expected to be between $4,030 million to $4,300 million. The company expects 2023 diluted EPS in the range of $7.23-$7.91.
Total revenues in 2022 came in at $20,773 million compared with $13,857 million in 2021.
Adjusted EBITDA in 2022 came in at $3,853 million compared with $2,278 million in 2021.
In 2022, adjusted diluted EPS came in at $6.69 compared with $3.19 reported in the previous year.
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 11.6% due to these changes.
At this time, Marriott has a nice Growth Score of B, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly 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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