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Here's Why Investors Should Retain Marriott Vacations Stock Now
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Marriott Vacations Worldwide Corporation (VAC - Free Report) is likely to benefit from strong rental performance, sales promotions and cost management efforts. Focus on expanding presence in high-demand destinations bodes well. However, dismal contract sales are a concern.
Factors Driving VAC Stock
VAC focuses on rental performance to drive growth. In the second quarter of 2024, the company witnessed strong rental results, with higher revenues from more keys rented and lower costs due to increased preview packages driving contract sales. This led to a 60% increase in rental profit in the Vacation Ownership segment, with the profit margin improving to more than 20% from last year’s levels.
Going forward, the company emphasized the utilization of Marriott, Sheraton, Westin and Hyatt brands in its Vacation Ownership segment to drive growth. Attributes of strong customer feedback and refined core offerings (aligned with today’s consumer needs) are likely to aid the company.
Marriott Vacations has proactively responded to the softer environment for Volumes Per Guest (VPG) by adjusting its sales promotions. The company expects 12% growth in tours in the second half of the year, driven by the reopening of its second sales center in Bali. By focusing on expanding its customer base, Marriott Vacations aims to stabilize VPG and contract sales growth over the long term.
Marriott Vacations continues to demonstrate effective cost management and strategic growth initiatives. The company expects general and administrative expenses to decrease by $8 million to $10 million year over year in the second half, courtesy of its ongoing cost savings initiatives.
VAC is exploring opportunities to boost growth in key markets. The anticipated benefits from the new Waikiki opening are expected to drive additional sales and tours in the second half of 2024. This focus on expanding its presence in high-demand destinations could provide a substantial tailwind to future earnings.
Concerns for VAC Stock
Image Source: Zacks Investment Research
Shares of Marriott Vacations have declined 19.9% in the past three months compared with the industry’s 3.4% decline. The downside can be attributed to dismal contract sales, owing to lower VPG and the impact of the Maui wildfires.
Total contract sales dropped 1% year over year to $449 million in the second quarter. The downside was caused by a 6% decline in VPG, partially offset by 5% tour growth. The decline in VPG is attributed to lower performance in North America and international sales operations, a larger mix of international tours and the ongoing impact from Maui sales centers.
During the second quarter, the company observed a slower-than-expected recovery in Maui, with visitor numbers and occupancies still below pre-wildfire levels. In the Exchange & Third-Party Management segment, adjusted EBITDA declined 22% year over year due to lower exchanges in Interval and reduced profit at Aqua Aston, impacted by the ongoing softness in Maui.
The company lowered its contract sales guidance for 2024 due to a decline in first-time buyer VPG and a slower-than-expected recovery in Maui. For 2024, the company expects contract sales in the range of $1,790-$1,825 million, down from the previous expectation of $1,880-$1,930 million.
Conclusion
Although VAC faces certain challenges, including lower contract sales and a slower-than-expected recovery in Maui, there are several reasons to retain the stock. The company's strong rental performance, strategic focus on expanding in high-demand destinations and effective cost-management efforts are expected to support growth. The emphasis on sales promotions and brand utilization bode well.
Although the near-term outlook is tempered by softer contract sales and lingering effects from recent events, Marriott Vacations’ proactive strategies and resilience in key areas suggest that it has the potential to overcome these hurdles. Investors should hold onto their shares for now, as the company’s initiatives could pave the way for growth in the longer term.
Zacks Rank and Stocks to Consider
Marriott Vacations currently carries a Zacks Rank #3 (Hold).
Royal Caribbean Cruises has a trailing four-quarter earnings surprise of 18.5%, on average. The stock has rallied 60.3% in the past year. The Zacks Consensus Estimate for RCL’s 2024 sales and earnings per share (EPS) calls for growth of 18.1% and 71.1%, respectively, from the year-ago levels.
DoubleDown Interactive has a trailing four-quarter earnings surprise of 22.1%, on average. The stock has surged 49.7% in the past year. The Zacks Consensus Estimate for DDI’s 2024 sales and EPS indicates an increase of 12.6% and 15.8%, respectively, from the year-ago levels.
Monarch Casino & Resort has a trailing four-quarter negative earnings surprise of 3.5%, on average. The stock has increased 17% in the past year. The Zacks Consensus Estimate for MCRI’s 2024 sales and EPS indicates an increase of 2.3% and 10%, respectively, from the year-ago levels.
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Marriott Vacations Worldwide Corporation (VAC - Free Report) is likely to benefit from strong rental performance, sales promotions and cost management efforts. Focus on expanding presence in high-demand destinations bodes well. However, dismal contract sales are a concern.
Factors Driving VAC Stock
VAC focuses on rental performance to drive growth. In the second quarter of 2024, the company witnessed strong rental results, with higher revenues from more keys rented and lower costs due to increased preview packages driving contract sales. This led to a 60% increase in rental profit in the Vacation Ownership segment, with the profit margin improving to more than 20% from last year’s levels.
Going forward, the company emphasized the utilization of Marriott, Sheraton, Westin and Hyatt brands in its Vacation Ownership segment to drive growth. Attributes of strong customer feedback and refined core offerings (aligned with today’s consumer needs) are likely to aid the company.
Marriott Vacations has proactively responded to the softer environment for Volumes Per Guest (VPG) by adjusting its sales promotions. The company expects 12% growth in tours in the second half of the year, driven by the reopening of its second sales center in Bali. By focusing on expanding its customer base, Marriott Vacations aims to stabilize VPG and contract sales growth over the long term.
Marriott Vacations continues to demonstrate effective cost management and strategic growth initiatives. The company expects general and administrative expenses to decrease by $8 million to $10 million year over year in the second half, courtesy of its ongoing cost savings initiatives.
VAC is exploring opportunities to boost growth in key markets. The anticipated benefits from the new Waikiki opening are expected to drive additional sales and tours in the second half of 2024. This focus on expanding its presence in high-demand destinations could provide a substantial tailwind to future earnings.
Concerns for VAC Stock
Image Source: Zacks Investment Research
Shares of Marriott Vacations have declined 19.9% in the past three months compared with the industry’s 3.4% decline. The downside can be attributed to dismal contract sales, owing to lower VPG and the impact of the Maui wildfires.
Total contract sales dropped 1% year over year to $449 million in the second quarter. The downside was caused by a 6% decline in VPG, partially offset by 5% tour growth. The decline in VPG is attributed to lower performance in North America and international sales operations, a larger mix of international tours and the ongoing impact from Maui sales centers.
During the second quarter, the company observed a slower-than-expected recovery in Maui, with visitor numbers and occupancies still below pre-wildfire levels. In the Exchange & Third-Party Management segment, adjusted EBITDA declined 22% year over year due to lower exchanges in Interval and reduced profit at Aqua Aston, impacted by the ongoing softness in Maui.
The company lowered its contract sales guidance for 2024 due to a decline in first-time buyer VPG and a slower-than-expected recovery in Maui. For 2024, the company expects contract sales in the range of $1,790-$1,825 million, down from the previous expectation of $1,880-$1,930 million.
Conclusion
Although VAC faces certain challenges, including lower contract sales and a slower-than-expected recovery in Maui, there are several reasons to retain the stock. The company's strong rental performance, strategic focus on expanding in high-demand destinations and effective cost-management efforts are expected to support growth. The emphasis on sales promotions and brand utilization bode well.
Although the near-term outlook is tempered by softer contract sales and lingering effects from recent events, Marriott Vacations’ proactive strategies and resilience in key areas suggest that it has the potential to overcome these hurdles. Investors should hold onto their shares for now, as the company’s initiatives could pave the way for growth in the longer term.
Zacks Rank and Stocks to Consider
Marriott Vacations currently carries a Zacks Rank #3 (Hold).
Some top-ranked stocks in the Zacks Consumer Discretionary sector are Royal Caribbean Cruises Ltd. (RCL - Free Report) , DoubleDown Interactive Co., Ltd. (DDI - Free Report) and Monarch Casino & Resort, Inc. (MCRI - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Royal Caribbean Cruises has a trailing four-quarter earnings surprise of 18.5%, on average. The stock has rallied 60.3% in the past year. The Zacks Consensus Estimate for RCL’s 2024 sales and earnings per share (EPS) calls for growth of 18.1% and 71.1%, respectively, from the year-ago levels.
DoubleDown Interactive has a trailing four-quarter earnings surprise of 22.1%, on average. The stock has surged 49.7% in the past year. The Zacks Consensus Estimate for DDI’s 2024 sales and EPS indicates an increase of 12.6% and 15.8%, respectively, from the year-ago levels.
Monarch Casino & Resort has a trailing four-quarter negative earnings surprise of 3.5%, on average. The stock has increased 17% in the past year. The Zacks Consensus Estimate for MCRI’s 2024 sales and EPS indicates an increase of 2.3% and 10%, respectively, from the year-ago levels.