Global hospitality company Marriott (NASDAQ:MAR) reported results in line with analysts’ expectations in Q1 CY2024, with revenue up 6.4% year on year to $5.98 billion. It made a non-GAAP profit of $2.13 per share, improving from its profit of $2.08 per share in the same quarter last year.
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Marriott (MAR) Q1 CY2024 Highlights:
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Revenue: $5.98 billion vs analyst estimates of $5.95 billion (small beat)
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EPS (non-GAAP): $2.13 vs analyst expectations of $2.16 (1.6% miss)
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EPS (non-GAAP) Guidance for Q2 CY2024 is $2.46 at the midpoint, below analyst estimates of $2.51
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EPS (non-GAAP) Guidance for full year 2024 is $9.48 at the midpoint, above analyst estimates of $9.44
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Gross Margin (GAAP): 95.2%, in line with the same quarter last year
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Market Capitalization: $68.07 billion
Anthony Capuano, President and Chief Executive Officer, said, “We were pleased with our results in the quarter, which included both excellent net rooms growth and cash generation. Worldwide RevPAR1 grew over 4 percent, with gains in both occupancy and ADR. Our international markets were particularly strong, posting RevPAR gains of 11 percent, led by nearly 17 percent year-over-year growth in Asia Pacific excluding China.
Founded by J. Willard Marriott in 1927, Marriott International (NASDAQ:MAR) is a global hospitality company with a portfolio of over 7,000 properties and 30 brands, spanning 130+ countries and territories.
Hotels, Resorts and Cruise Lines
Hotels, resorts, and cruise line companies often sell experiences rather than tangible products, and in the last decade-plus, consumers have slowly shifted from buying “things” (wasteful) to buying “experiences” (memorable). In addition, the internet has introduced new ways of approaching leisure and lodging such as booking homes and longer-term accommodations. Traditional hotel, resorts, and cruise line companies must innovate to stay relevant in a market rife with innovation.
Sales Growth
A company’s long-term performance can indicate its business quality. Any business can enjoy short-lived success, but best-in-class ones sustain growth over many years. Marriott’s annualized revenue growth rate of 3% over the last five years was weak for a consumer discretionary business.
Within consumer discretionary, a long-term historical view may miss a company riding a successful new property or emerging trend. That’s why we also follow short-term performance. Marriott’s annualized revenue growth of 23.7% over the last two years is above its five-year trend, suggesting some bright spots.
We can better understand the company’s revenue dynamics by analyzing its revenue per available room, which clocked in at $170.75 this quarter and is a key metric accounting for average daily rates and occupancy levels. Over the last two years, Marriott’s revenue per room averaged 28.8% year-on-year growth. Because this number is higher than its revenue growth, we can see its room bookings outperformed its sales from other areas like restaurants, bars, and amenities.
This quarter, Marriott grew its revenue by 6.4% year on year, and its $5.98 billion of revenue was in line with Wall Street’s estimates. Looking ahead, Wall Street expects sales to grow 7.2% over the next 12 months, an acceleration from this quarter.
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Operating Margin
Operating margin is a key measure of profitability. Think of it as net income–the bottom line–excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.
Marriott has been a well-managed company over the last eight quarters. It’s demonstrated it can be one of the more profitable businesses in the consumer discretionary sector, boasting an average operating margin of 16.5%.
This quarter, Marriott generated an operating profit margin of 14.7%, down 2.3 percentage points year on year.
Over the next 12 months, Wall Street expects Marriott to become more profitable. Analysts are expecting the company’s LTM operating margin of 15.7% to rise to 16.7%.
Key Takeaways from Marriott’s Q1 Results
Marriott’s operating margin missed and its EPS fell short of Wall Street’s estimates. Next quarter’s EPS guidance missed expectations as well, although one positive is that full year gross fee revenue was raised from previous and full year EPS guidance slightly exceeded Wall Street’s estimates. Overall, this was a mixed quarter for Marriott. The company is down 1.5% on the results and currently trades at $232.52 per share.
So should you invest in Marriott right now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.