Tuesday, August 11, 2020

Marriott Shares Book Gains Despite Q2 Miss

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the markets today

     

What’s happening: Shares of Marriott International gained on Monday despite the hotel operator reporting weaker-than-expected results for its second quarter.

What happened: With the hotel industry being among the worst hit sectors by the pandemic, Marriott and rival Hilton were forced to cut thousands of jobs and close various properties amid a spike in cancellations.

Although Marriott’s second-quarter results missed expectations, the company indicated that one of the regions was showing great signs of improvement and will likely reach the 2019 occupancy levels soon.

How were the results: The world's largest hotel chain swung to a loss during the second quarter, with a steep decline in revenues.

  • Total revenue plunged 72% to $1.46 billion, missing even the conservative estimate of $1.68 billion.
  • Net loss came in at $234 million, or 72 cents per share, versus a net income of $232 million, or 69 cents per share, in the same quarter last year.
  • Excluding onetime items, the adjusted loss stood at 64 cents per share, worse than the consensus view of a loss of 41 cents per share.

Why it matters: Marriot suffered a steep decline in room bookings due to hotel closures amid the pandemic. The hotel operator’s quarterly comparable RevPAR (revenue per available room) plunged 84.4% worldwide.

The company said that it had gradually reopened around 91% of its hotels around the world, up from 74% in April.

Management also noted that occupancy rates were steadily recovery in almost all regions, with Greater China leading the rebound, where all hotels have been open since early May. The company also projected occupancy levels in the Greater China region to return to the pre-pandemic levels by next year.

CEO Arne Sorenson said in a statement, “While the full recovery from covid-19 will clearly take time, the current trends we are seeing reinforce our view that when people feel safe traveling, demand returns quickly.”

At the end of the second quarter, the hotel operator had $2.3 billion in cash and equivalents. With bookings recovering, Marriot estimates cash burn averaging $85 million per month in 2020, versus its previous estimate of $145 million.

How shares responded: After falling earlier in the session, Marriot’s shares made a sharp rebound, gaining 3.6% to close at $97.13. The company’s stock has gained more than 11% over the past three months.

What to watch: With the hotel chain witnessing a gradual recovery in bookings, especially in China, investors will keep an eye on the progress in Marriot’s occupancy levels this year. There are concerns, however, around the second wave of infections delaying the recovery in certain regions.

The Markets Today

     

UK stocks will be in focus today, ahead of a basket of economic reports scheduled for release later in the day.

Context: British stocks closed higher on Monday, with markets digesting news of deteriorating political relations between Washington and China. US President Donald Trump's orders of a stimulus package provided some relief to markets.

Details: China reportedly imposed sanctions on eleven American officials in retaliation to the Trump administration’s crackdown on Chinese tech companies, adding to the tensions between the world’s two largest economies.

The markets breathed a sigh of relief as the US President signed executive orders over the weekend to defer payroll taxes and provide unemployment benefits to American workers, replacing the earlier program that expired in July.

Shares of oil majors including BP and Royal Dutch Shell gained on Monday, after Saudi Aramco projected a recovery in oil demand in Asia.

Clarkson’s shares climbed 12% after the shipping services provider reported a rise in pretax profit and revenue for the six months to June 30.

The UK FTSE 100 index rose 0.3% to close at 6,050.59 on Monday, while the mid-cap FTSE 250 index added 0.6% to settle at 17,724.94.

What to watch: Investors await reports on claimant count, employment change and unemployment rate from the UK. The number of people claiming unemployment related benefits, which fell by 28,100 to 2.6 million in June, is expected to rise 10,000 in July. The UK unemployment rate is expected to spike to 4.2% in the three months to June, from 3.9% during the three months to May.

Investors will continue to access the covid-19 figures, with the total number of cases exceeding 20 million globally.

Other Markets: US indices trading closed mostly higher on Monday, with the Dow Jones index and S&P 500 up by 1.3% and 0.27%, respectively, while the Nasdaq 100 slipped 0.39%.

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Futures at 0400 (GMT)

What else to watch today

     

Eurozone’s Zew economic sentiment index, Germany’s Zew economic sentiment index, South Africa's unemployment rate, unemployed persons and industrial production, Mexico's industrial production, Canada’s housing starts, Russia's economic growth and balance of trade, China’s total vehicle sales as well as the US NFIB business optimism index, producer prices, Redbook index and API’s crude oil stockpiles.