(MAR) Marriot International Reports a Penny Ahead – Raises Outlook

Marriott International Inc. (MAR) reported first quarter 2012 earnings of 30 cents per share, beating the Zacks Consensus Estimate by a penny. Moreover, quarterly earnings were 30% higher than the year-ago quarter adjusted earnings of 23 cents per share.

On a reported basis, earnings per share were 30 cents versus 26 cents in the year-ago quarter. Reported earnings include the adjustment for timeshare spin-off.

Total revenue was $2,552 million in the reported quarter versus $2440 million in the prior-year quarter.

Inside the Headline Numbers

Base management fees rose 3% year over year to $124 million while franchise fees increased 8% year over year to $126 million, attributable to higher revenue per available room (RevPAR) at existing hotels. Incentive management fees jumped 19% year over year to $50 million. Owned, leased, corporate housing and other revenues fell 3% to $217 million.

RevPAR for worldwide comparable system-wide properties grew 6.8% during the quarter. International comparable system-wide RevPAR climbed 5.9% year over year with a 2.7% increase in average daily rate.

In North America, comparable system-wide RevPAR leaped 6.9%, with the average daily rate up 3.6%. RevPAR for comparable company-operated North American full-service and luxury hotels escalated 7.1%, driven by a 3.5% rise in average daily rate. RevPAR for comparable company-operated North American limited service hotels grew 6.7%, driven by a 3.6% upside in average daily rate.

Update on Hotel Rooms

During the quarter, Marriott added 24 new properties and divested 10 properties. At the end of the first quarter, Marriott’s pipeline of hotels under construction awaiting conversion or approved for development totaled approximately 700 properties with over 115,000 rooms. The company expects to open approximately 25,000 to 30,000 rooms and divest 7,000 to 8000 rooms in 2012.


At the end of the first quarter, total debt was $2,527.0 million while cash balances totaled $290 million, compared with $2,171 million of debt and $102 million of cash at the end of 2011, respectively.

During the quarter, the company issued $600 million of Series K bonds due 2019 and expects to utilize the proceeds for general corporate purposes. In the reported quarter, the company repurchased 4.2 million shares for $150 million.


For the second quarter, the company estimates that system-wide REVPAR will increase in the range of 6% to 8% in North America, outside North America and worldwide.

The company expects total fee revenue between $345 million and $355 million and earnings per share between 39 cents and 43 cents in the second quarter of 2012.

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.

Our Take

We expect estimates to go up in the coming days, based on better-than-expected first quarter 2012 results and raised outlook for 2012. The lodging company continues to benefit from increased demand with group business also gaining momentum and favorable pricing. We believe Marriott’s strong pipeline, solid balance sheet and lower operating cost structure augur well for its business. However, in the near term, the company’s business in Europe will remain soft due to the prevailing economic uncertainties.

Marriott, which competes with the likes of Intercontinental Hotels Group Plc. (IHG) and Starwood Hotels & Resorts Worldwide Inc. (HOT), currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock.

STARWOOD HOTELS (HOT): Free Stock Analysis Report

INTERCONTL HTLS (IHG): Free Stock Analysis Report

MARRIOTT INTL-A (MAR): Free Stock Analysis Report

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