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Marriott's 1Q17 Earnings Preview: What Can Investors Expect?

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Part 3
Marriott's 1Q17 Earnings Preview: What Can Investors Expect? PART 3 OF 8

Marriott’s 2017 Revenues Could Grow 25% despite Industry Slowdown

Analyst estimates

Analysts estimate that Marriott’s (MAR) 1Q17 revenues could grow 40.1% year-over-year (or YoY) to $5.3 billion. Analysts also expect 47.5% YoY growth in 2Q17, leading to revenues of $5.8 billion. Analysts expect 40.3% growth YoY in 3Q17, leading to $5.3 billion in revenues.

Most of this growth is attributed to the Starwood acquisition that Marriott completed in 3Q16. The impact of this acquisition is expected to be over in 4Q17, when revenues are expected to grow at a normal rate of 3.6% YoY to $5.7 billion.

Marriott&#8217;s 2017 Revenues Could Grow 25% despite Industry Slowdown

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For fiscal 2017, this trend could lead to 27.9% growth as the benefit of Starwood consolidation is realized. The combined entity is expected to post sales of $21.8 billion. Its 2018 growth is expected to slow 4.3% to $22.8 billion, which is in line with Starwood’s estimate for the lodging industry.

Outlook

For 1Q17, Marriott’s total fee revenues are expected show flat to 1% growth to $740 million–$750 million. Its operating expenses are expected to fall 5%–11% to $70 million–$75 million. Its general administrative expenses are expected to fall 16%–18% to $235 million–$240 million, which could lead to operating income growth of 9%–14% to $530 million–$555 million.

For fiscal 2017, Marriott’s total fee revenues are expected to grow 3%–6% to ~$3.2 billion–$3.3 billion. Owned, leased, and other revenues are expected to fall 16%–19% to $345 million–$360 million. This is due to the sale of some Legacy Starwood properties during the quarter. General, administrative, and other expenses are expected to increase to $895 million–$905 million compared to $704 million in 2016.

Investors can gain exposure to hotel stocks by investing in the Consumer Discretionary Select Sector SPDR ETF (XLY), which holds 1.2% of its portfolio in Marriott International (MAR) and 0.39% in Wyndham Worldwide (WYN). Peers Hilton (HLT) and Hyatt (H) are not held by this ETF.

In the next article, we’ll discuss Marriott’s profitability.

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