Why Marriott Vacations Shares Dropped

Is this meaningful? Or just another movement?

Jeremy Bowman
Jeremy Bowman
Feb 21, 2013 at 6:10PM
Consumer Goods

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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