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Why Shares of Marriott Are Falling on Friday

By Lou Whiteman - May 10, 2019 at 2:17PM

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Earnings gave investors little to get excited about.

What happened

Shares of Marriott International (MAR -1.09%) traded down 5% on Friday even though the company posted expectation-beating earnings and raised its dividend, as investors focused on a revenue shortfall and an overall sluggish environment for hotel stocks. The stock was down about 3% as of 2:11 p.m. EDT.

So what

Marriott's quarter at first glance looks like a winner, with the company reporting adjusted earnings of $1.41 per share, ahead of the $1.34 consensus estimate. But total revenue, at $5.01 billion, was up less than 1% year over year and came in short of the $5.11 billion analysts were expecting.

Adjusted net income actually fell slightly year over year, but Marriott's per-share number was aided by stock repurchases.

A view of a building with its reflection in a pool in front.

Marriott-owned Ritz Carlton Phulay Bay, Thailand. Image source: Marriott.

Worldwide comparable revenue per available room, or RevPAR, gained 1.1%, which is a slower growth rate than in previous quarters.

Marriott did raise its full-year earnings-per-share guidance to a range of $5.97 to $6.19 from $5.87 to $6.10. Wall Street was already near the upper edge of the previous guidance, expecting $6.09 per share. The company also increased its quarterly dividend by 17% to $0.48 per share.

"Our results in the first quarter highlight the resiliency of our business model and the strength of our brands," company CEO Arne M. Sorenson said in a statement. "Year to date through May 8, we have returned nearly $1.2 billion to our shareholders through share repurchases and dividends, and we continue to expect to return at least $3 billion for full year 2019."

Now what

There was nothing wrong with Marriott's quarter, but there was little to get excited about. The company should be a cash-generating machine for the foreseeable future, and as it showed in its 2016 deal for Starwood Hotels & Resorts and its recent push to compete with Airbnb, it isn't afraid to make bold moves to deploy that capital.

That wasn't enough to get the stock going on what is a down day on Wall Street. But for long-term investors, Marriott continues to show it has the wherewithal to be a survivor throughout the business cycle.

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