J.P Morgan: Marriott Earnings Get Lift From Increased Travel

Earlier this evening Marriott MAR reported 4Q10 EPS of $0.39 that were $0.03 above consensus and $0.04 above J.P Morgan's estimate. MAR provided 2011 EPS guidance of $1.35 to $1.45 that brackets JPM's and the Street's $1.40 estimate, and it believe the in-line guide is likely consistent with recent expectations post HOT's 4Q10 results reported earlier this month. The big news in the earnings release is that MAR plans to spin off its timeshare operations to shareholders through a tax-free dividend in late 2011. J.P Morgan believes the motivation for MAR's spinning off the business is that its lodging fee business would be more highly valued given relatively stronger growth there versus the growth prospects for timeshare. At MAR's analyst day on 10/28/10, MAR provided 3-year scenarios that imply lodging fees could grow 43% from 2010A to 2013E, whereas timeshare profits could grow 30% over this time frame. For full-year 2011, MAR maintained its 2011 RevPAR growth guidance of +6-8% and provided EPS of $1.40, right in line with the Street. 2011 guidance assumes a full year of timeshare result and not a lot of share buybacks. Looking ahead to the 1Q11, MAR guided to +7-9% WW RevPAR growth and an EPS range of $0.24 to $0.28. J.P Morgan has an Overweight rating on Marriott MAR closed Monday at $41