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Marriott (MAR) or Hilton (HLT): Which is a Better Stock?
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The improving economy in the United States has been favoring hospitality companies. In the next 10 years, global travel is estimated to increase at a compound rate of 7%. International trips are expected to reach 1.8 billion by 2030, which reflects growing demand for hotels.
Leading hoteliers like Marriott International, Inc. (MAR - Free Report) and Hilton Worldwide Holdings Inc. (HLT - Free Report) are striving to rake in profits from the competitive industry.
Marriott and Hilton have a distinguished footprint across the globe along with a strong domestic presence. Marriott and its brands own more than 6,400 properties worldwide. Hilton currently has a portfolio of 14 world-class brands, comprising more than 5,100 properties with nearly 838,000 rooms in 103 countries and territories.
The companies are focusing on the expansion of their global foothold and capitalize on the demand for hotels in the international markets.
Let’s find out which stock is a better pick.
Price Performance
Marriot has had an impressive run on the bourse year to date, compared with Hilton. While Marriott has returned 61.2% year to date outperforming its industry’s26.4% rally, Hilton has lost 2.7%.
Estimated Earnings & Revenues
Arguably, earnings growth is of utmost importance for determining a stock’s potential as surging profit levels indicate strong prospects (and stock price gains).
For the current year, Marriott’s earnings per share are expected to grow nearly 11%. Moreover, year-over-year sales growth for the current year is expected at 32.9%. However, Hilton’s current-year earnings and sales are anticipated to decline 29% and 22.1%, respectively. This provides Marriott an edge over Hilton.
Valuation
The P/E ratio is considered for the evaluation of a stock. Typically, stocks with high P/E are overvalued, whereas those with low P/E are undervalued. However, this metric disregards the company's growth rate. Hence, an investor is likely to pick stocks which are trading at substantially lower PE multiples.
Since we are considering two companies with different growth trajectories, price/earnings to growth (PEG) ratio will provide better valuation. The PEG ratio takes into account the companies’ individual growth paths.
Although the companies’ PEG ratios indicate a stretched valuation compared with the industry, Marriot is in a favorable position. While the industry’s PEG ratio is 11.3, Marriott and Hilton have a PEG of 3.4x and 8.3x, respectively.
Return on Equity
Marriott delivered a return on equity (ROE) of 31.6% in the trailing 12 months compared with the industry’s gain of 6.2%. Hilton’s ROE is pegged at 27.3%. This indicates that Marriott reinvests more efficiently than its peers.
Net Margin
Traditionally, gross margin for hospitality companies is comparatively higher as majority of the expenses come from cost of operations. However, the sector’s profits are not very high which is evident from net profit margin or net margin. The industry’s trailing 12-month net margin is 4.6, while that for Marriott and Hilton are 6.3% and 0.3%, respectively.
Clearly, Marriott’s cost savings have led to better margins whereas Hilton lags in terms of margin expansion.
Final Thoughts
Our comparative analysis shows that Marriott has an edge over Hilton in terms of price movement, higher projected EPS growth, valuation, ROE and margins.
Current-year earnings for Clarus and Choice Hotels are expected to improve 294.4% and 16%, respectively.
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Marriott (MAR) or Hilton (HLT): Which is a Better Stock?
The improving economy in the United States has been favoring hospitality companies. In the next 10 years, global travel is estimated to increase at a compound rate of 7%. International trips are expected to reach 1.8 billion by 2030, which reflects growing demand for hotels.
Leading hoteliers like Marriott International, Inc. (MAR - Free Report) and Hilton Worldwide Holdings Inc. (HLT - Free Report) are striving to rake in profits from the competitive industry.
Marriott and Hilton have a distinguished footprint across the globe along with a strong domestic presence. Marriott and its brands own more than 6,400 properties worldwide. Hilton currently has a portfolio of 14 world-class brands, comprising more than 5,100 properties with nearly 838,000 rooms in 103 countries and territories.
The companies are focusing on the expansion of their global foothold and capitalize on the demand for hotels in the international markets.
Let’s find out which stock is a better pick.
Price Performance
Marriot has had an impressive run on the bourse year to date, compared with Hilton. While Marriott has returned 61.2% year to date outperforming its industry’s26.4% rally, Hilton has lost 2.7%.
Estimated Earnings & Revenues
Arguably, earnings growth is of utmost importance for determining a stock’s potential as surging profit levels indicate strong prospects (and stock price gains).
For the current year, Marriott’s earnings per share are expected to grow nearly 11%. Moreover, year-over-year sales growth for the current year is expected at 32.9%. However, Hilton’s current-year earnings and sales are anticipated to decline 29% and 22.1%, respectively. This provides Marriott an edge over Hilton.
Valuation
The P/E ratio is considered for the evaluation of a stock. Typically, stocks with high P/E are overvalued, whereas those with low P/E are undervalued. However, this metric disregards the company's growth rate. Hence, an investor is likely to pick stocks which are trading at substantially lower PE multiples.
Since we are considering two companies with different growth trajectories, price/earnings to growth (PEG) ratio will provide better valuation. The PEG ratio takes into account the companies’ individual growth paths.
Although the companies’ PEG ratios indicate a stretched valuation compared with the industry, Marriot is in a favorable position. While the industry’s PEG ratio is 11.3, Marriott and Hilton have a PEG of 3.4x and 8.3x, respectively.
Return on Equity
Marriott delivered a return on equity (ROE) of 31.6% in the trailing 12 months compared with the industry’s gain of 6.2%. Hilton’s ROE is pegged at 27.3%. This indicates that Marriott reinvests more efficiently than its peers.
Net Margin
Traditionally, gross margin for hospitality companies is comparatively higher as majority of the expenses come from cost of operations. However, the sector’s profits are not very high which is evident from net profit margin or net margin. The industry’s trailing 12-month net margin is 4.6, while that for Marriott and Hilton are 6.3% and 0.3%, respectively.
Clearly, Marriott’s cost savings have led to better margins whereas Hilton lags in terms of margin expansion.
Final Thoughts
Our comparative analysis shows that Marriott has an edge over Hilton in terms of price movement, higher projected EPS growth, valuation, ROE and margins.
Zacks Rank & Other Picks
Marriott and Hilton carry a Zacks Rank #2 (Buy).
Two top-ranked stocks in the Consumer Discretionary sector include Choice Hotels International, Inc. (CHH - Free Report) and Clarus Corporation (CLAR - Free Report) . While Clarus sports a Zacks Rank #1 (Strong Buy), Choice Hotels carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Current-year earnings for Clarus and Choice Hotels are expected to improve 294.4% and 16%, respectively.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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