Marriott International: Dividend Raise And Expected Earnings Beat
08 May 2018 - Summary
MAR posted a very good 2017.
Analysts continue to revise earnings estimates upward.
Techincal pattern supports breakout potential with a positive Q1 earnings beat.
The business and why you should buy
Marriott International, Inc. (MAR) is a leading global hotel chain that operates, manages and franchises properties around the globe. On May 4, the company announced that they were raising their quarterly dividend by 24% to $0.41 per share.
On top of that, the company is expected to beat estimates when they release their Q1 earnings report today, May 8, after the market close. The expectation to beat is shown through positive estimate revisions leading up to the earnings release as well as a solid 2017 that showed growth in all of the key metrics. With the share price of MAR consolidating in a bull flag pattern for most of 2018, a solid earnings beat could send share prices exponentially higher in the coming sessions and close to my $150 price target.
MAR finished off an impressive 2017 by growing all of their key metrics YoY for the fifth consecutive year. According to their 2017 10-K, revenue grew 34% to $22.89 billion from $17.07 billion in 2016. This increase was aided by a positive global economy and the increase in desire to travel by the younger populations. Operating income grew to $2.36 billion, up from $1.37 billion in 2016 and operating margins continued to expand, now at 11% up from 10.27% the year prior. The company finished 2017 with an adjusted EBITDA of $3.2 billion, up 8% from 2016 and adjusted EPS grew at an impressive 32% to $4.36 per share.
RevPAR increased across all regions for MAR in 2017. Worldwide RevPAR increased 3.1% for the year while North America saw a 2.1% increase. On the company's Q4 earnings call, CEO Arne M. Sorenson attributed this growth to the hurricane and disaster relief needs around the globe and the desire of younger populations to travel with a good global economy offering more opportunity. The company's loyalty program, currently at 110 million members, has proven to be a success to drive sales as well and continues to attract new members. The company expects this RevPAR growth to continue into 2018 with an expected 1% to 2% growth in North America, 3% to 5% growth outside of North America and 1% to 3% growth worldwide.