Marriott Int'l (MAR) is projecting "messy" upcoming financial quarters but expects its recent $13 billion purchase of Starwood Hotels & Resorts Worldwide to drive higher revenues, CEO Arne Sorenson said this morning during the hotel company's third quarter earnings call.
After yesterday's market close, the Maryland-based company reported 2016 third quarter adjusted earnings of 91 cents per diluted share on revenue of $3.77 billion, compared year-over-year to earnings of 78 cents per diluted share on $3.58 billion in revenue. Analysts surveyed at FactSet expected Marriott to post third-quarter earnings of 89 cents per share on $4 billion in revenue.
Shares of Marriott rose $2.51, a 3.52% increase, to $73.61 in today's early afternoon trading.
On Sept. 23, Marriott closed on its acquisition of hotel and leisure company Starwood. The company's earnings report shows Marriott spent $228 million in the third quarter in costs related to the $13 billion transaction.
Sorenson said further transaction and transitional costs for 2016 and 2017 are "a bit difficult for us to predict at this time." The operator, franchiser and licensor of hotels and timeshare properties is working on sealing various other deals that are currently delayed.
"We have a range of pipelines we're looking at overwhelmingly," Sorenson said. "The deals continue to move forward but are pushed out. They are taking a bit longer to put together."
Sorenson said the company will continue to transfer membership programs and transition Starwood and Marriott management in the fourth quarter, adding that the 3.3 billion points transferred already through programs "did not go unnoticed."
The company expects properties operated under Starwood to alone drive 2016 adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $180 million to $190 million. Marriott's EBITDA rose 10% in the third quarter to $474 million.
Marriott's debt in the third quarter totaled $8.8 million with cash balances of $1.1 million. At the end of the 2015 year, the company posted debt of $4.1 million and cash balances of $96 million.
Marriott's weaker-than-expected revenue reflects overall global concerns such as terrorism and Zika virus threats, deterring people from traveling. Sorenson said he predicts these global pressures to continue in the fourth quarter.
Areas in which the company saw depressed revenue include San Francisco, Houston, New York and Macau, while Toronto, Hawaii and Shanghai drove Marriott's sales. Marriott saw short-lived sales growth in Brazil due to the 2016 Rio Olympic Games but Sorenson said he anticipates those numbers to decline in the fourth quarter now that the games are over.