Leading hotelier, Marriott International, Inc. (MAR) is set to report third quarter 2014 results on Oct 28, 2014. Last quarter, it posted a 5.97% positive surprise. Let’s see how things are shaping up for this announcement.
Factors to Consider This Quarter
Marriot’s earnings have been consistently beating the Zacks Consensus Estimate, thanks to group and transient demand that drove revenue per available room (RevPar). The company expects earnings per share to be in the range of 59 cents to 63 cents per share in the third quarter, up from the year-ago figure of 52 cents per share. The Zacks Consensus Estimate is currently pegged at 62 cents per share.
Given its property locations and strong brand recognition, we believe the company is well positioned to benefit from higher demand on the back of stepped-up business traveling in major North American and international locations. The company had stated that it expects group bookings to be strong in the third quarter in North America and sees strength in the corporate and leisure transient business. Therefore, the company expects RevPAR growth in North America in the range of 6% to 8%.
Marriott is consistently trying to expand its presence worldwide. However, this makes the company vulnerable to fluctuation in exchange rates and uncertainty in the regions where it operates.
Particularly, a deteriorating political situation and a sluggish economy in Brazil and Chile continue to weigh on demand in these regions. Moreover, the political turmoil in Thailand, Argentine currency devaluation, visa restrictions and concerns about the corona virus in Saudi Arabia, and Vietnam’s dispute with China also add to the woes.
Egypt is in the midst of political instability while riots are affecting growth prospects in Nigeria, owing to kidnappings and terrorist attacks. Meanwhile, the business in Europe is clouded by the unrest in Ukraine and Russian actions in Crimea. We expect these headwinds to impact third quarter results.
Earnings Whispers?
Our proven model does not conclusively show that Marriott International will beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Ranks #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 62 cents. Hence, the difference is 0.00%.
Zacks Rank #2 (Buy): Though Zacks Ranks #1, 2 or 3 increase the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.
We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Other Stocks to Consider
Other stocks in the broader consumer discretionary sector that have both a positive earnings ESP and a favorable Zacks Rank are:
Penn National Gaming Inc. (PENN) with Earnings ESP of +16.67% and a Zacks Rank #3 (Hold).
Pinnacle Entertainment Inc. (PNK) with Earnings ESP of +4.44% and a Zacks Rank #3.
The Walt Disney Company (DIS) with Earnings ESP of +3.41% and a Zacks Rank #2.
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