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MAR: Marriott International (MAR) Earnings Signals: Buy or Sell Signals?

MAR: Marriott International (MAR) Earnings Signals: Buy or Sell Signals?

 


Marriott International, Inc.Tues.) is scheduled to report its fourth-quarter and full-year results on February 13. Wall Street expects the company to post higher earnings and revenue during the quarter than last year. In this piece, I've discussed why it might be wise to wait for a better entry point into the stock, despite the potential increase in earnings and revenue for the quarter.

For the fourth quarter, MARs EPS and revenue are expected to grow 8.3% and 4.7% year-over-year to $2.12 billion and $6.20 billion, respectively. The company has an excellent earnings track record, having beaten the EPS consensus estimate in each of the trailing four quarters.

The company reported solid earnings and revenue during the third quarter. MAR added 97 properties (17,192 rooms) to its worldwide lodging portfolio during the third quarter, including nearly 13,000 rooms in international markets and more than 4,900 conversion rooms. However, eleven properties (1,494 rooms) exited the MARs portfolio during the quarter.

At the end of the third quarter, MARs global lodging system totaled approximately 8,700 properties, with approximately 1,581,000 rooms. Additionally, its worldwide development pipeline totaled 3,239 properties with approximately 557,000 rooms, including 24 properties with approximately 40,300 rooms approved for development but not yet subject to signed contracts.

The pipeline includes 1,081 properties with approximately 238,000 rooms under construction, or 43%, including approximately 37,000 rooms from the MGM deal. Its worldwide RevPAR during the third quarter increased 8.8% compared to the year-ago quarter. Its RevPAR in the US and Canada increased 4.3%, and RevPAR in international markets increased 21.8%.

At the end of the third quarter, its total debt was $11.80 billion, compared to $10.10 billion for the fiscal year ended December 31, 2022. For fiscal 2023, MAR raised its estimates for worldwide RevPAR growth guidance between 14% and 15% year-over-year. Its RevPAR growth in the US and Canada is expected to increase between 8% and 9% year-over-year, and international RevPAR growth is expected to increase between 31% and 32%.

Meanwhile, its net room growth is expected to increase between 4.2% and 4.5%. Its worldwide RevPAR growth for the fourth quarter is expected to be between 6% and 7.5% year-over-year. Additionally, its RevPAR growth in the US and Canada is expected to increase between 3% and 4% year-over-year, and international RevPAR growth is expected to increase between 14% and 16%.

For the fourth quarter, MAR's gross fee revenue is expected to be between $1,185 million and $1,215 million. Its adjusted EBITDA is expected to be between $1,115 million and $1,150 million and adjusted EPS is expected to be between $2.04 and $2.13. The company's gross fee income for fiscal 2023 is expected to be between $4,765 million and $4,795 million.

Additionally, its full-year adjusted EBITDA is expected to be between $4,574 million and $4,609 million, and adjusted EPS is expected to be between $8.50 and $8.59.

MARs stock has gained 38% over the past nine months and 41.2% over the past year to close the last trading session at $247.02.

Here's what you might want to consider before the next earnings release:

Strong finances

MAR's total revenue for the fiscal third quarter ended September 30, 2023, increased 11.6% year-over-year to $5.93 billion. Its net fee income rose 13.2% over the year-ago quarter to $1.17 billion. The company's adjusted operating income rose 17.7% year over year to $959 million.

Additionally, its adjusted net income rose 15.1% year-over-year to $634 million. Also, its adjusted EPS came in at $2.11, representing a year-over-year increase of 24.9%.

Favorable analyst ratings

Analysts expect MARs EPS and revenue for fiscal 2023 to grow 28.4% and 15% year-over-year to $8.59 billion and $23.88 billion, respectively. Its fiscal 2024 EPS and revenue are expected to grow 12.7% and 7.4% year-over-year to $9.69 billion and $25.64 billion, respectively.

Extended assessment

In terms of non-GAAP forward P/E, MARs 28.75x is 78.8% higher than the industry average of 16.08x. It's 1.84x non-GAAP forward PEG is 13% higher than the industry average of 1.63x. Likewise, its EV/EBITDA of 18.38x is 82.6% higher than the industry average of 10.07x.

Mixed profitability

In terms of trailing 12-month EBITDA margin, MARs 72.27% is 565.6% higher than the industry average of 10.86%. Likewise, its trailing 12-month FCF margin of 35.53x is 549% higher than the industry average of 5.48x. Also, its 7.48% Trailing Equity/12-Month Sales is 144.6% higher than the industry average of 3.06%.

On the other hand, MARs 0.24x trailing 12-month asset turnover ratio is 75% lower than the industry average of 0.98x.

POWR estimates reflect uncertainty

MAR has a C overall rating, equal to a Neutral in ours POWR Ratings the system. POWR ratings are calculated by considering 118 different factors, each weighted to an optimal scale.

Our proprietary rating system also rates each stock based on eight different categories. MAR has a D grade for value, consistent with its expansive rating. Its 1.64 beta justifies a C grade for Stability.

It has a grade of C for Quality, in sync with its blended stability.

MAR ranks 14th out of 19 stocks in Travel Hotels/Resorts industry. Click here to access the Height, Momentum, and Sensation MARs ratings.

end

Due to favorable business momentum worldwide, MAR is expected to end fiscal year 2023 on a solid note. The company raised its RevPAR guidance for the full year. It announced the achievement of strong net room growth of 4.7% in 2023. MAR currently has a solid portfolio spread across luxury, affordable mid-scale and branded residences, helping to provide more options for landlords , franchises and guests.

Despite the positive developments, MAR is trading at an expensive valuation. Given its mixed profitability and stability, it might be wise to wait for a better entry point into the stock.

How Marriott International, Inc. Works (MAR) Stack up against her colleagues?

MAR has an overall POWR rating of C, which equates to a Neutral rating. You can view these A and B rated stocks inside Travel Hotels/Resorts industry: Genting Berhad (LIE), Atour Lifestyle Holdings Limited (BOTH), and Travel + Leisure Co. (TNL). To explore more shopping rated hotel/resort travel stocks, Click here.

What should be done next?

Discover 10 widely held stocks that our proprietary model shows have tremendous downside potential. Please make sure that none of these death trap Shares are hidden in your wallet:

10 Stocks to Sell NOW! >


MAR stock was trading at $246.08 per share on Monday morning, down $0.94 (-0.38%). Year-to-date, MAR has gained 9.12%, versus a 5.48% gain in the benchmark S&P 500 over the same period.

About the Author: Dipanjan Banchur

Since he was in high school, Dipanjani was interested in the scholarship. This led him to obtain a master's degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a keen interest in reading and analyzing emerging trends in financial markets. More…

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