Marriott Vacations (NYSE:VAC) Exceeds Q1 Expectations

Max Juang /
2024/05/06 4:28 pm EDT

Vacation ownership company Marriott Vacations (NYSE:VAC) reported results ahead of analysts' expectations in Q1 CY2024, with revenue up 2.2% year on year to $1.20 billion. It made a non-GAAP profit of $1.80 per share, down from its profit of $2.45 per share in the same quarter last year.

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Marriott Vacations (VAC) Q1 CY2024 Highlights:

  • Revenue: $1.20 billion vs analyst estimates of $1.17 billion (1.9% beat)
  • Adjusted EBITDA: $187 million vs analyst estimates of $179 billion (4.7% beat)
  • EPS (non-GAAP): $1.80 vs analyst estimates of $1.73 (4.2% beat)
  • Full year guidance for EPS (non-GAAP): $7.81 at the midpoint vs analyst estimates of $7.94 (1.6% miss)
  • Gross Margin (GAAP): 74.1%, down from 77.1% in the same quarter last year
  • Market Capitalization: $3.42 billion

“It was great to see so many of our owners and guests spending time with their families at our resorts during the first quarter making memories that will last a lifetime,” said John Geller, president and chief executive officer.

Spun off from Marriott International in 1984, Marriott Vacations (NYSE:VAC) is a vacation company providing leisure experiences for travelers around the world.

Hotels, Resorts and Cruise Lines

Hotels, resorts, and cruise line companies often sell experiences rather than tangible products, and in the last decade-plus, consumers have slowly shifted from buying "things" (wasteful) to buying "experiences" (memorable). In addition, the internet has introduced new ways of approaching leisure and lodging such as booking homes and longer-term accommodations. Traditional hotel, resorts, and cruise line companies must innovate to stay relevant in a market rife with innovation.

Sales Growth

A company's long-term performance can indicate its business quality. Any business can enjoy short-lived success, but best-in-class ones sustain growth over many years. Marriott Vacations's annualized revenue growth rate of 6.6% over the last five years was weak for a consumer discretionary business. Marriott Vacations Total RevenueWithin consumer discretionary, a long-term historical view may miss a company riding a successful new property or emerging trend. That's why we also follow short-term performance. Marriott Vacations's annualized revenue growth of 6.6% over the last two years aligns with its five-year revenue growth, suggesting the company's demand has been stable.

This quarter, Marriott Vacations reported reasonable year-on-year revenue growth of 2.2%, and its $1.20 billion of revenue topped Wall Street's estimates by 1.9%. Looking ahead, Wall Street expects sales to grow 5.7% over the next 12 months, an acceleration from this quarter.

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Operating Margin

Operating margin is a key measure of profitability. Think of it as net income–the bottom line–excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Marriott Vacations has managed its expenses well over the last two years. It's demonstrated solid profitability for a consumer discretionary business, producing an average operating margin of 14.2%.

in line with the same quarter last year. This indicates the company's costs have been relatively stable.

Key Takeaways from Marriott Vacations's Q1 Results

It was good to see Marriott Vacations beat analysts' revenue expectations this quarter. We were also happy its EPS narrowly outperformed Wall Street's estimates. On the other hand, its full-year earnings forecast was underwhelming and missed expectations. Zooming out, we think this was still a decent, albeit mixed, quarter, showing that the company is staying on track. The stock is up 4.6% after reporting and currently trades at $102 per share.

So should you invest in Marriott Vacations right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.