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Marriott Vacations (VAC) Q3 Earnings Preview: A Hit or Miss?


Marriott Vacations Worldwide Corp. VAC is scheduled to report third-quarter 2016 numbers on Oct 13, before the opening bell.

Last quarter, this Florida-based vacation ownership company posted a positive earnings surprise of 4.85%. In fact, the company has surpassed earnings estimates in two of the past four quarters, with an average beat of 1.35%.

Let’s see how things are shaping up for this announcement.

MARRIOT VAC WW Price and EPS Surprise

MARRIOT VAC WW Price and EPS Surprise | MARRIOT VAC WW Quote

Factors Likely to Influence this Quarter

Marriott Vacations, one of the major players in the timeshare industry, is poised to benefit from positive timeshare industry trends. The company has been able to maintain a steady flow of clients by offering tours to diverse locations and programs with greater outreach.

Marriott Vacations has been recording higher contract sales and rental revenues of late, and the trend is expected to continue in the third quarter as well. Meanwhile, we expect volume per guest – sales volume for a given period divided by the number of groups toured – for Marriott Vacations to increase in the to-be-reported quarter backed by strong marketing initiatives.

Moreover, addition of new properties in the portfolio along with renovation of the company’s various vacation ownership units should further boost the quarter’s results.

However, as the timeshare industry is extensively marketing-oriented and relies heavily on sales initiatives to attract customers, the company’s increased marketing expenses might pressurize third quarter margins.

Earnings Whispers

Our proven model does not conclusively show that Marriott Vacations is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.

Zacks ESP: Marriott Vacations has an earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $1.20.

Zacks Rank: Marriott Vacations has a Zacks Rank #3 which increases the predictive power of ESP. However, the company’s negative ESP makes surprise prediction difficult.

Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some restaurant companies to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

Boyd Gaming Corporation BYD has an earnings ESP of +20% and a Zacks Rank #2.

Las Vegas Sands Corp. LVS has an earnings ESP of +1.69% and a Zacks Rank #3.

Churchill Downs Inc. CHDN has an earnings ESP of +1.14% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

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