Not the highest quality quarter but guidance was better.
MAR remains our favorite hotel company for the long-term. The stock has had a nice ride and could take a breather, but numbers look like they are going higher. Absent macro deterioration – MAR more defensive but clearly not immune – the stock should continue to work over the intermediate and long term.
MAR’s Q1 results were slightly below our projections numbers but in-line with the street. A low tax rate contributed almost $0.02 to the Q. Here’s where the miss vs. our numbers came from:
- Base mgmt and franchise fees were $13MM lower (~5%)
- Lower managed room growth – only 0.3% YoY vs. our estimate of 1.6% (3.4k less rooms were added to the system than we modeled)
- Base fees were also negatively impacted by a $3MM reversal of fees from 2 contract revisions
- Incentive fees were $8MM higher, up 18%
- 29% of managed hotels paid incentive fees vs. 25% last year
- Owned leased/other profits were in-line but revenues were lower – so basically it was in-line since top line doesn’t really matter for this line item. We don’t know what the breakout was yet between fees vs. owned/leased
- G&A was $3MM lower
- The tax rate was 3.7% lower than guided rate and contributing almost $0.02 in EPS
- Net interest expense was $7MM higher than we modeled but equity earnings loss was $4MM lower as well
Other stuff:
- WW RevPAR was 6.8% - above the 5-6% guidance range
- MAR bought back $150MM of stock or 4.2MM shares in the Q – we modeled $200MM
- Provided YoY comparison on Autograph hotels for RevPAR
- There were a lot more hotel “exits” this quarter than prior quarters – hence, lower net rooms growth
Guidance:
- Increased WW RevPAR guidance to 6-8% from 5-7%
- Increased FY fee guidance by $15MM or 1%
- Increased owned, leased corporate housing and other, net result by $5-10MM
- Raised EPS guidance 5-6 cents
- Upped capex guidance by $50MM
- Increased EBITDA guidance by $10-25MM