IB Net Payout Yields Model

Marriott International Repurchases $400M In Q212

After the close, Marriott International (MAR) reported inline earnings and slightly lower revenue. The stock appears to be selling off slighting in after hours.

More importantly to Stone Fox Capital was the announcement of spending $400M on share repurchases. This number was slightly above the Q211 numbers helping push up the Net Payout Yield (NPY) just slightly.

The fundamental news for Q212 was decent with REVPAR holding up. The company has apparently guided down slightly for the rest of 2012.

On a fundamental basis, the stock will likely trade weak for a while. On a NPY basis, the stock is a huge buy on any dips. Marriott clearly isn't worried about any long term weakness from the 2H of the year. The company spent the largest amount on repurchases for the last 3 quarters.

The share count has now dropped to 338M from 369.4M in Q211 or roughly 8.4%. The company has 25.8M shares remaining on the authorization which is much higher than the amount spent so far this year. In addition, the company has a 1.3% dividend yield providing the solid 12% NPY.

Since our NPY model isn't fundamentally based, we'll steer away from any other fundamental discussions. The stock isn't highly followed by us. The key remains that NPY is top notch over 12% placing the stock on our radar for purchase. If the stock were to fall due to any disappointment from this earnings report, it will likely be added to the model.

Details from the PR:


  • Diluted earnings per share (EPS) totaled $0.42, a 24 percent increase over prior year adjusted results;
  • On a constant dollar basis, worldwide comparable systemwide REVPAR rose 6.7 percent.  Average daily rate rose 4.1 percent using constant dollars;
  • At the end of the second quarter, the company's worldwide pipeline of hotels under construction, awaiting conversion or approved for development totaled approximately 115,000 rooms, not including the nearly 8,000 rooms from the planned acquisition of the Gaylord brand and hotel management business;
  • Over 5,000 rooms opened during the quarter, including over 1,300 rooms converted from competitor brands and nearly 2,700 rooms in international markets;
  • Marriott repurchased 10.5 million shares of the company's common stock for $400 million during the quarter.  Year-to-date through the second quarter, the company repurchased 14.7 million shares for $550 million;
  • For comparable Marriott Hotels & Resorts properties in North America, group room revenue increased nearly 8 percent in the second quarter compared to the year ago quarter. Group booking pace is up 10 percent for the remainder of 2012;
  • Earnings before interest, taxes, depreciation and amortization (EBITDA) totaled $289 million in the quarter, a 13 percent increase over second quarter 2011 adjusted EBITDA.
Weighted average fully diluted shares outstanding used to calculate diluted EPS totaled 338.0 million in the 2012 second quarter compared to 369.4 million in the year-ago quarter.
The company repurchased 10.5 million shares of common stock in the second quarter at a cost of $400 million.  Year-to-date through the second quarter, Marriott repurchased 14.7 million shares of its stock for $550 million.  The remaining share repurchase authorization, as of June 15, 2012, totaled 25.8 million shares.

For the third quarter, the company expects comparable systemwide REVPAR on a constant dollar basis will increase 6 to 8 percent in North America, 5 to 7 percent outside North America and 6 to 8 percent worldwide.

Disclosure: No positions mentioned. Please review the disclaimer page for more details. 


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