Marriott Q2 earnings in line with estimates, but revenue fails to impress

Marriott International (NASDAQ: MAR) stock slipped about 3% after the bell as the second quarter earnings came in line with estimates, but revenue fell short of consensus. The hotel chain touched a new 52-week high of $144 mark in July and the stock has recovered 22% this year.

Revenue contracted 2% to $5.3 billion due to lower incentive management fees from North America and cost reimbursement revenue. Analysts were anticipating sales of $5.5 billion. Adjusted earnings decreased 10% to $1.56, however came in line with street estimates. It’s worth noting that the Q2 earnings benefitted from 26 cents through sale of assets.

Commenting on the Q2 performance, CEO Arne Sorenson said, “Worldwide RevPAR increased 1.2 percent in the second quarter with higher leisure transient demand in Europe, the Caribbean and South America, and the Asia Pacific regions.” He also added, “Our results in the second quarter highlight the resiliency of our business model and the growing strength of our brands.”

Gross fee revenues grew 5% to $999 million within the company’s guided range of $990-1010 million. Revenue per available room (RevPAR) rose 1.2% aided by strong demand from the international front offset by muted growth in North America.

Profit margins were down 10% due to lower RevPAR growth and increasing wages, offset by reduction of expenses and ongoing synergies through the Starwood deal. The hotel chain added 16,000 rooms during the second quarter.

Looking Ahead

Marriott is expecting gross fee revenues for the third quarter to be between $945-960 million and diluted EPS of $1.47-1.51 along with RevPAR growth of 1-2%. The street is projecting sales of $5.32 billion and non-GAAP earnings of $1.59 per share.

For the Q4 period, the company projects gross fee revenue in the range of $981-996 million and diluted earnings of $1.53-1.58 per share.

For the full-year period, diluted EPS is expected at $5.97-6.06 and gross free revenue of $3.82-3.85 billion. Analysts are anticipating adjusted earnings of $6.11 per share and top line of $21.44 billion.

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