Marriott Posts ‘Outstanding’ Quarter, Crows About Stock Buybacks — So Why Did Shares Slump?

On a third-quarter earnings call on Thursday, Marriott International CEO Anthony Capuano announced “another quarter of outstanding results” with profits of $630 million, up from $220 million in the same quarter a year ago. Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) — a key measure of core corporate profitability — totaled $985 million in the July-September quarter, compared to $683 million for the third quarter in 2021.

The largest hotel company in the world, Marriott International operates of more than 30 hospitality brands, ranging from luxury and upscale names like Ritz Carlton, Marriott and Westin to mid-priced and budget chains like Courtyard by Marriott and Fairfield Inn.

The Bethesda, Maryland-based company’s global RevPAR — revenue per available room, a key metric in the hospitality industry — is up nearly 2% compared to 2019, evidence that the company has fully recovered from the Covid-19 pandemic.

More good news for the company’s bottom line: Marriott’s popular co-branded credit card has acquired a record number of new cardholders with record spending during the first three quarters of the year, with credit card fees up over 20% year to date. “This has been particularly driven by China, where we’ve had great traction after launching our first cards there in July,” said Capuano.

Marriott is projecting continued growth in the fourth quarter, anticipating RevPAR to bump up another 2-4% growth compared to 2019 levels, fueled by a 4-6% increase in the United States and Canada over the same quarter in the last pre-pandemic year.

During the third quarter, Marriott repurchased 6.2 million shares of common stock for $950 million, bringing year-to-date buyback totals to $1.9 billion returned to shareholders.

The company was bullish on its prospects in 2023, even in the event of an economic downturn. “We definitely see that we could perform relatively better than we have in prior recessions,” said Marriott CFO Leeny Oberg.

But Wall Street also heard some sour notes. International RevPAR in the fourth-quarter is expected to be flat from 2019 levels. And new Marriott properties had delayed openings in China, an important market where strict Covid-19 policies are still in place.

“The market in China is most certainly where we’re seeing the most challenges,” Capuano said.

The price of Marriott shares slid about 6% after the earnings call but had recovered about half of that amount by 9:30 a.m. Friday morning. In the past five days, Marriott stock is down 5.7%, a steeper drop than the 4% decline of the Dow Jones U.S. Hotel Index over the same period.