Marriott Shares Gain on Profit, Upgraded Forecast

Thursday, 19 Apr 2012 05:05 PM

 

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Shares of Marriott International Inc., the largest publicly traded U.S. hotel chain, surged the most in almost five months Thursday after the company reported a higher profit and raised its forecasts for 2012 amid climbing business-group demand.

Marriott, whose brands include Ritz-Carlton, probably will have earnings of $1.58 to $1.69 a share this year, the Bethesda, Maryland-based company said Wednesday in a statement. That’s higher than its $1.52-to-$1.64 forecast from February.

“The hotel recovery continues with solid demand growth and minimal supply,” Robert LaFleur, an analyst at Cantor Fitzgerald LP in New York, wrote today in a note to clients. “Marriott’s confidence has improved in the past three months and it is comfortable enough to raise its 2012 guidance. The stock should react well today.”

Marriott rose 4.3 percent to $39.45 at the close in New York, the most since Nov. 30.

The company’s results are being buoyed by improving demand and rates in the group travel segment, which accounts for about 40 percent of Marriott’s business, according to Patrick Scholes, an analyst at FBR Capital Markets Corp. in New York. Smaller groups are leading the demand increase, President and Chief Executive Officer Arne Sorenson said today during a conference call with analysts.

“The relatively smaller meetings are leading group bookings -- meetings that fill 300, 400, 500 to 600-room hotels not necessarily those that are filling the marquee 2,000-room hotels,” he said. “Most industries are showing good appetite,” with the possible exception of government groups. 

Ritz-Carlton

Increasing demand at the company’s Ritz-Carlton hotels has enabled the luxury brand to raise rates in the last quarter, Sorenson said.

Net income climbed to $104 million, or 30 cents a share, in the first quarter from $101 million, or 26 cents, a year earlier, Marriott said. The company was expected to have earnings of 29 cents, the average estimate of 24 analysts in a Bloomberg survey. Marriott yesterday forecast second-quarter earnings of 39 cents to 43 cents a share.

Revenue climbed to $2.5 billion in the first quarter from an adjusted $2.4 billion, which excludes Marriott’s timeshare business, spun off in November. Without the adjustment, revenue fell 8.1 percent.

Room Revenue Rises

Marriott said comparable revenue per available room rose 6.9 percent at hotels systemwide in North America and 6.8 percent worldwide. That’s more than the 5 percent to 6 percent increase, before adjustments for currency fluctuations, that it forecast in February for North America and worldwide.

For this quarter and the full year, Marriott now expects revpar, an industry measure of occupancy and rates, to gain 6 percent to 8 percent in all regions before currency adjustments.

Marriott plans to invest between $600 million to $800 million in its properties in 2012, including acquisitions and $100 million on maintenance.

“We’ll expect to see hotel transactions in the industry step up, and there’ll hopefully be some opportunities we can participate in with our partners or on our own,” Sorenson said on the conference call. “The most compelling place to invest our own money in is in new brands.”

In the first quarter, the company purchased 4.2 million shares of its stock for $150 million. With its planned spending, Marriott expects to deliver about $1 billion to shareholders through share buybacks and dividends.

First-quarter results were announced after the close of regular U.S. trading yesterday.

Starwood Hotels & Resorts Worldwide Inc. rose 3.3 percent to $58.46 at 11:38 a.m. The owner of the luxury St. Regis and W brands plans to report first-quarter results on April 26.

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