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Why Marriott International Inc's Shares Popped 7% Today

By Travis Hoium - May 9, 2017 at 3:29PM

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Strong earnings, driven by rising room rates, are sending Marriott International's shares higher today.

What happened

Shares of hotel chain Marriott International Inc (MAR 4.53%) jumped as much as 7.1% on Tuesday after reporting first-quarter earnings results. At 1:30 p.m. EDT shares were holding at a 6.4% gain on the day.

So what

Revenue was up 47% to $5.56 billion and net income jumped 67% to $365 million, or $0.94 per share. On an adjusted basis, which pulls out one-time items, earnings were $1.01 per share compared to the $0.91 per share in earnings analysts were expecting on revenue of $5.29 billion.

Guest sitting in a Marriott hotel room.

Image source: Marriott.

Revenue per available room was up 3.1% and the company added 17,000 rooms to the portfolio in the quarter. It also has another 430,000 rooms in the development pipeline worldwide.

Now what

Operating conditions are improving and management is using high real estate values to sell assets like the Westin Maui, which sold for $317 million in the quarter. These funds are then expected to be used to return $2 billion to shareholders this year, $1 million of which has already been returned.

The most encouraging sign for investors is that room rates are steadily rising even as the room base grows. That's a recipe for long-term earnings growth and, when combined with the return of capital to shareholders, is a great sign for Marriott International's business and its stock.

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