Can Marriott (MAR) Keep its Earnings Streak Alive in Q3?

Marriott International, Inc. MAR is scheduled to report third-quarter 2017 numbers on Nov 7, after market close.

Last quarter, the company came up with a positive earnings surprise of 10.78%. Notably, Marriott’s earnings have been surpassing the Zacks Consensus Estimate consistently in the last 14 quarters, with an average positive surprise of 6.33% in the trailing four quarters.

Given the company’s increased scale and distribution post Starwood purchase, Marriott’s top line is likely get a boost in the to-be-reported quarter. This, in turn, is expected to drive the bottom line and aid in keeping up the earnings streak. For the third quarter, management expects earnings per share to be in the range of 96 cents to 99 cents.

Also, our proven model shows that Marriott has the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to increase the odds of an earnings beat in the this quarter. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate is pegged at +0.17%. This is a major indicator of a likely positive earnings surprise.

Zacks Rank: Marriott’s Zacks Rank #2 (Buy) when combined with a positive ESP makes us reasonably confident of an earnings beat.

Conversely, we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Meanwhile, the Zacks Consensus Estimate for earnings and revenues in the to-be-reported quarter is pegged at 98 cents and nearly $5 billion, respectively.

Factors Likely to Influence Q3 Results

Increasing business and leisure travel on the back of improving economic indicators and positive employment numbers, along with strong transient demand is likely to boost performance in the quarter. Marriott’s rising North American business and large international exposure are also expected to drive growth.

Notably, the company is witnessing increased RevPAR in most markets around the world over the last few quarters. The trend is expected to continue in the third quarter as well.

Furthermore, investments in technology for hotel bookings are likely to improve guest experience, which in turn is anticipated to boost occupancy.
Meanwhile, for the quarter, Marriott projects comparable system-wide RevPAR to be roughly flat in North America on a constant dollar basis. RevPAR for worldwide comparable system-wide properties is projected to inch up in the range of 1% to 2%. Outside North America, the company expects the same to increase in 3% to 5% band.

However, lingering global uncertainty in some key operating regions is likely to limit revenue growth. Also, heightened competition in the domestic market given increased supply is expected to mar third-quarter RevPAR. Additionally, negative currency translation may continue to hurt revenues and profits in the to-be-reported quarter.

Stocks to Consider

Here are some other companies to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

Choice Hotels International, Inc. CHH has an Earnings ESP of +0.72% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Belmond Ltd. BEL has an Earnings ESP of +6.25% and a Zacks Rank #3.

Extended Stay America, Inc. STAY has an Earnings ESP of +0.44% and a Zacks Rank #3.

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