Why Marriott Vacations Shares Dropped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Marriott Vacations Worldwide (NYSE: VAC  ) were sent packing today, falling as much as 15%, after its guidance disappointed in its earnings report.

So what: The parent of Marriott Vacation club and other timeshare-based resort properties actually beat estimates, delivering an adjusted per-share profit of $0.54, against expectations of $0.46. Revenue increased 3%, to $499 million, beating estimates at $478.6 million. However, investors seemed to be turned off by the fact that Marriott actually lost $0.22 a share when accounting for lawsuit settlements and other one-time charges, and the disappointing forecast. While its 2013 EPS projections of $1.77 to $2.00 were ahead of estimates at $1.76, Marriott said it expected free cash flow of just $35 million to $50 million, well below 2012's total of $132 million.

Now what: Today's drop seems exaggerated. Investors may be getting tired of seeing non-recurring costs eat into profits, but EPS growth has been strong, even if that means adjusting for those costs. North American contract sales were up 10% in the quarter, and the improving economy should help drive future growth. Marriott should be able bounce back from today's drop in the near future.

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  • Report this Comment On August 14, 2013, at 2:04 PM, barbie15fletcher wrote:

    Most timeshare companies like Marriott are taking advantage of people, often those who are more vulnerable and less able to resist hard sales tactics. I have heard of many cases where maintenance costs rise well above inflation. It would appear the timeshare companies lock people into contracts and then drive up their profits though increased maintenance charges. I recommend you to read this article on how most timeshare companies work:

    http://www.timesharescam.com/blog/115-timeshare-companies/

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