By Low De Wei | Bloomberg Passengers boarding a trans-Pacific flight from Auckland to New York on Thursday evening had no idea of the rude awakening that awaited them: a 16-hour ordeal that saw them back at square one. Air New Zealand Ltd. Flight NZ2 should have touched down at John F. Kennedy International Airport…Passengers take 16-hour flight to nowhere after Auckland to New York U-turn — Daily Bulletin
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Here Are Factors Setting the Tone for Marriott’s (MAR) Q4 Earnings
Marriott International, Inc. MAR is scheduled to release fourth-quarter 2022 results on Feb 14, 2023, before the opening bell. In the previous quarter, the company’s earnings matched the Zacks Consensus Estimate of $1.69.
The Trend in Estimate Revision
The Zacks Consensus Estimate for the fourth-quarter bottom line is pegged at $1.84 per share, indicating growth of 41.5% from $1.30 reported in the year-ago quarter.
For revenues, the consensus mark is pegged at $5,612 million, suggesting growth of 26.2% from the prior-year quarter’s reported figure.
Key Factors to Note
Marriot’s fourth-quarter performance is likely to have benefited from robust leisure demand and business and cross-border travel improvements. During the previous-quarter earnings call, the company stated that cross-border guests accounted for 15% of global room nights, up from 12% reported in the first quarter of 2022. Also, it reported a rise in last-minute booking trends, thereby leading to a meaningful compression in pricing power and boosting group ADR for new bookings.
With global trends improving, the recovery momentum is likely to have continued in the fourth quarter. Attributes such as pent-up demand for all types of travel, the shift of spending toward experiences versus goods, sustained high levels of employment and resilient travel spending are likely to have boosted the company’s performance in the to-be-reported quarter.
Increased focus on the Marriott Bonvoy loyalty program bodes well for the company. With nearly 173 million members globally, the company’s loyalty program Marriott Bonvoy is supporting its marketing strategies. The company engages its customers with promotional offers such as grocery and retail spending accelerators on its co-branded credit cards. During the third quarter of 2022, the program reported solid penetration levels of 60% in the United States and Canada and 53% globally. Also, the company reported increased sign-ups following the addition of new benefits to its U.S. cards. Given the meaningful pickup in demand coupled with solid customer acceptance for credit card programs, the momentum is likely to have continued in the fourth quarter.
The Zacks Consensus Estimate for fourth-quarter revenues at base management and franchise fees is pegged at $282 million and $674 million, indicating year-over-year growth of 30% and 29.6%, respectively.
However, coronavirus-induced travel restrictions (in China) and supply chain disruptions are likely to have affected the company’s operations in the third quarter. Although revenue per available room (RevPAR) is likely to have increased sequentially in Greater China and Asia Pacific (excluding China), it is expected to have remained below pre-pandemic levels.
What the Zacks Model Unveils
Our proven model predicts an earnings beat for Marriott this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.
Earnings ESP: Marriott has an Earnings ESP of +1.63%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
PayPal’s Q4 report and decent outlook checks out, sending shares slightly higher on the day
PayPal is carving out gains today following its earnings beat and fairly encouraging outlook in Q4. There was some uneasiness heading into PYPL’s report, illuminated by the stock slipping roughly 10% from February 2nd highs after some of its competition and partners, like GOOGLE, Amazon, and Affirm, delivered concerning quarterly reports. Although there were still a few areas of concern within PYPL’s Q4 results, the company dished out confidence-inspiring numbers for the most part, and CEO Daniel Schulman, who announced his retirement within the next year, carried an optimistic tone throughout the call.
- PYPL topped its Q4 adjusted EPS expectations of $1.18-1.20, expanding its bottom line 11.7% to $1.24 while growing revs in line with its forecast, registering 6.7% growth to $7.38 bln. Management detailed how the company was on track to surpass its earnings forecast and grow revs in line with previous projections in early December, so investors had likely priced in these positives from Q4.
- Total Payment Volume (TPV) climbed 5% yr/yr on a spot basis and 9% excluding currency fluctuations, edging past PYPL’s prior targets.
- However, net new actives (NNAs) of 2.9 mln were flat sequentially, missing PYPL’s 3-4 mln goal.
- Perhaps more notable, PYPL’s non-GAAP operating margins expanded for the first time since 1Q21 in Q4, adding 115 bps yr/yr to 22.9%, marking a return to profitable growth.
- Identifying cost savings has been a top priority for PYPL in recent months. Recall PYPL’s decision to trim its global workforce by around 7% late last month. PYPL also noted that it discovered an incremental $600 mln of cost savings on top of the already announced $1.3 bln. Outgoing CEO Daniel Schulman stated that the organization is confident its cost structure will enable ongoing investments in high-conviction growth initiatives while helping expand margins.
- Mr. Schulman added that discretionary spending will likely remain under pressure throughout the year, while global e-commerce growth should just squeak into positive territory. Still, the company is also seeing disinflationary signs, which should result in an uptick in spending. Encouragingly, management commented that Q1 is already off to a much stronger start than anticipated, with branded checkout volumes accelerating sequentially.
- As a result, PYPL expects Q1 revs to expand by around 7.5% on a spot basis and 9% excluding FX impacts yr/yr, and earnings of $1.08-1.10, topping consensus.
- However, due to heightened uncertainty, PYPL is still not providing full-year revenue guidance. Still, its earnings forecast of $4.87 soared past analyst expectations. PYPL noted that this guidance assumes sales growth in the mid-single-digits on a currency-neutral basis. It also does not expect total active accounts to grow this year.
Overall, PYPL rang up a decent quarter, especially after some nerve-racking reports by a few of its peers. As it is well-known and likely priced in by now, FY23 will probably not be smooth sailing. However, PYPL is conducting the right moves through cost-cutting measures and streamlining operations, which will position it nicely to step on the gas once e-commerce growth reaccelerates.