Marriott International Inc. (NASDAQ:MAR)

The period under review demonstrates significant fluctuations in economic profit. Net operating profit after taxes (NOPAT) exhibited an initial decline from 2015 to 2016, followed by substantial growth through 2018, and then a decrease in 2019. The cost of capital remained relatively stable, with a slight increase in 2017, before returning to levels similar to those observed in 2015 and 2016. Invested capital experienced a dramatic increase between 2015 and 2016, followed by a decline and relative stability through 2019. These movements collectively impacted economic profit, resulting in a shift from positive to negative values and back again.

NOPAT Trend

NOPAT decreased from US$1,097 million in 2015 to US$1,039 million in 2016, representing a decline of approximately 5.3%. A significant recovery occurred in 2017, with NOPAT reaching US$1,463 million, and further growth was observed in 2018, peaking at US$2,260 million. However, NOPAT decreased substantially in 2019 to US$1,577 million, indicating a weakening in operational profitability.

Cost of Capital Stability

The cost of capital remained within a narrow range throughout the period. It increased from 14.50% in 2015 to 14.60% in 2016, then rose to 15.55% in 2017, before decreasing to 15.07% in 2018 and returning to 14.50% in 2019. This relative stability suggests consistent financing conditions over the observed timeframe.

Invested Capital Volatility

Invested capital experienced considerable volatility. A substantial increase occurred between 2015 and 2016, rising from US$758 million to US$16,537 million. This was followed by a decrease to US$14,229 million in 2017, and a further slight decrease to US$13,992 million in 2019. The large increase in 2016 warrants further investigation to understand the underlying drivers, such as acquisitions or significant capital expenditures.

Economic Profit Performance

Economic profit demonstrated a marked shift in performance. A positive economic profit of US$987 million was recorded in 2015. This was followed by a negative economic profit of US$1,375 million in 2016, US$749 million in 2017, and US$452 million in 2019. A brief return to positive economic profit was observed in 2018, with a value of US$57 million. The negative economic profit in 2016, 2017, and 2019 indicates that the returns generated were insufficient to cover the cost of capital employed.

The fluctuations in economic profit appear to be driven by a combination of changes in NOPAT and invested capital, with the cost of capital playing a less significant role. The substantial increase in invested capital in 2016, coupled with a relatively stable NOPAT, contributed to the negative economic profit observed in that year. While NOPAT improved in subsequent years, it was not consistently sufficient to offset the high level of invested capital and the cost of funding it, resulting in continued periods of negative economic profit.

The financial data reflects the company's net income and net operating profit after taxes (NOPAT) over the five-year period from 2015 to 2019.

Net Income

Net income displayed fluctuations during the analyzed period. It began at 859 million US dollars in 2015, experienced a slight decrease to 780 million in 2016, then increased significantly to 1,372 million in 2017. The upward trend continued with a peak at 1,907 million in 2018 before declining to 1,273 million in 2019. This pattern suggests variability in profitability, with a notable peak in 2018 followed by a reduction in the subsequent year.

Net Operating Profit After Taxes (NOPAT)

The NOPAT figures followed a somewhat similar pattern, starting at 1,097 million US dollars in 2015 and slightly decreasing to 1,039 million in 2016. In 2017, NOPAT increased sharply to 1,463 million and continued its upward trajectory to reach the highest value of 2,260 million in 2018. However, in 2019, NOPAT saw a decrease to 1,577 million. The larger magnitude of changes in NOPAT compared to net income indicates that operating profitability experienced more pronounced fluctuations, with a strong peak in 2018.

Overall, the data reveals a pattern of growth in both net income and NOPAT leading up to 2018, followed by a decline in 2019. The significant increase in 2018 suggests a particularly strong operational and financial performance that year, which was not sustained in 2019. This trend may prompt further examination of underlying factors affecting profitability, including operating efficiency, market conditions, or extraordinary items impacting net income.

Provision for Income Taxes

The provision for income taxes exhibits significant fluctuation over the five-year period. It started at 396 million USD in 2015, increased slightly to 404 million USD in 2016, then surged sharply to 1,464 million USD in 2017. Following this peak, it decreased substantially to 438 million USD in 2018 and further to 326 million USD in 2019. This volatility suggests irregularities potentially related to changes in taxable income, tax strategies, or one-time tax events within the observed period.

Cash Operating Taxes

Cash operating taxes show an upward trend from 315 million USD in 2015 to a peak of 1,691 million USD in 2017. After this peak, cash taxes declined considerably to 626 million USD in 2018 and then decreased slightly to 577 million USD in 2019. The large increase in 2017 followed by a sharp reduction indicates a potential timing difference between accrued tax provisions and actual cash taxes paid, or a resolution of prior period tax liabilities.

Overall Insights

Both provision for income taxes and cash operating taxes demonstrate pronounced variability, especially in 2017, where both metrics reached their highest values within the period. The 2017 spike may reflect extraordinary tax circumstances, such as adjustments for deferred tax liabilities, changes in tax legislation, or significant shifts in pre-tax income figures. The subsequent decreases in 2018 and 2019 suggest normalization or rectification following the exceptional activity in 2017.

Total Reported Debt & Leases

The total reported debt and leases shows a consistent upward trend throughout the period from 2015 to 2019. The amount more than doubled from approximately $4.9 billion in 2015 to roughly $12 billion in 2019. This indicates a significant increase in the company’s leverage and financial obligations over these years.

Shareholders’ Equity (Deficit)

Shareholders’ equity exhibits notable volatility over the period. It started with a deficit of about $3.6 billion in 2015, turned positive to reach a peak of approximately $5.4 billion in 2016, and then gradually declined in subsequent years to a much smaller positive value of around $0.7 billion by the end of 2019. The sharp swing from deficit to surplus and the subsequent erosion suggests fluctuations in net assets, possibly driven by operational performance, capital changes, or valuation adjustments.

Invested Capital

Invested capital experienced substantial growth from 2015 to 2016, jumping from $758 million to over $16.5 billion, reflecting a major change in asset base or capital structure. After this significant increase, the invested capital decreases slightly over the following years, stabilizing near $14 billion by 2019. This pattern indicates a period of considerable investment or acquisition activity followed by a phase of relative stabilization or modest divestment.

Overall Insights

The data suggests an overall increase in leverage with rising debt levels and fluctuating equity, which may point to increased financial risk or strategic financing decisions. The large increase in invested capital followed by a moderate decline could reflect business expansion efforts followed by optimization or consolidation. The reduction in shareholders’ equity after peaking might warrant further investigation into profitability, asset impairments, or dividend policies affecting retained earnings.

The period under review demonstrates significant fluctuations in economic performance. Economic profit exhibited considerable volatility, transitioning from a positive value in 2015 to negative values in subsequent years, before a brief return to positive territory in 2018, and then reverting to a negative value in 2019. Invested capital experienced a substantial increase between 2015 and 2016, followed by a decline over the remaining years, stabilizing in the latter part of the period. The economic spread ratio mirrors the trend in economic profit, displaying a marked decrease from a high in 2015 to negative values, with a slight positive value in 2018 before declining again in 2019.

Economic Profit

Economic profit began at US$987 million in 2015, then decreased substantially to a loss of US$1,375 million in 2016. It remained negative for 2017 at US$749 million, improved to a profit of US$57 million in 2018, and then declined to a loss of US$452 million in 2019. This indicates inconsistent ability to generate returns exceeding the cost of capital.

Invested Capital

Invested capital increased dramatically from US$758 million in 2015 to US$16,537 million in 2016. Following this peak, it decreased to US$14,229 million in 2017, US$14,627 million in 2018, and US$13,992 million in 2019. The initial surge in invested capital, followed by a gradual decline, suggests potential shifts in capital allocation strategies or project investments.

Economic Spread Ratio

The economic spread ratio started at 130.30% in 2015, indicating a substantial spread between return on invested capital and the cost of capital. This ratio then decreased significantly to -8.31% in 2016, remaining negative at -5.27% in 2017. A brief positive value of 0.39% was observed in 2018, before falling to -3.23% in 2019. The consistently negative values in the later years suggest that returns on invested capital were generally below the cost of capital.

The combined trends suggest a period of initial strong economic performance followed by challenges in generating returns that cover the cost of capital. The large increase in invested capital in 2016 did not translate into sustained economic profit, and the economic spread ratio indicates a diminishing ability to create value over time.

The economic profit margin exhibited considerable fluctuation between 2015 and 2019. Initial profitability, as measured by economic profit, declined significantly over the period, resulting in corresponding changes to the economic profit margin.

Economic Profit Margin Trend

In 2015, the economic profit margin stood at 6.82%. This represents a positive return on adjusted revenues. However, the margin turned negative in 2016, reaching -8.05%, and remained negative through 2019. A slight improvement was observed in 2018, with the margin increasing to 0.27%, but this was not sustained, falling back to -2.14% in 2019.

The negative economic profit margins in 2016, 2017, 2019 indicate that the company’s economic profit—the profit earned above the cost of capital—was negative during those years. This suggests that the company was not generating sufficient returns to cover its capital costs. The brief positive margin in 2018 suggests a temporary improvement in profitability relative to capital costs, but this was not maintained.

Relationship to Adjusted Revenues

Adjusted revenues increased from US$14,486 million in 2015 to US$22,894 million in 2017, then decreased to US$20,904 million in 2018, and remained relatively stable at US$21,101 million in 2019. Despite the revenue growth between 2015 and 2017, the economic profit margin declined during this period, indicating that revenue increases were not sufficient to offset increases in the cost of capital or declines in operational efficiency. The subsequent revenue decrease in 2018 coincided with a temporary positive margin, but the margin again became negative in 2019 despite stable revenues.

The overall trend suggests a weakening ability to generate economic profit over the analyzed timeframe. While revenue increased initially, the cost of generating those revenues, relative to the capital employed, appears to have risen, leading to diminished economic profitability.