Back to top

Analyst Blog

We maintain our Neutral recommendation on Marriott International Inc. (MAR - Analyst Report). While the company’s strong performance in fourth-quarter 2012, solid developmental pipeline, resurgence in North America and cost saving initiatives are positives, slowdown in some markets, lingering concerns and tough year-over-year comparisons in Europe keep us on the sidelines at the current level.
 
Why the Reiteration?

 
Marriot’s fourth-quarter 2012 adjusted earnings and revenues were ahead of the Zacks Consensus Estimate and the year-ago results.  Marriott has a substantial development pipeline and is poised to benefit from the increase in demand for hotels, going forward. The lodging industry in North America is in a revival mode.  The company expects to open 90,000 to 105,000 rooms between 2012 and 2014. Marriott expects 2013 to be favorable due to continued strong demand and pricing.

Marriott is stringently controlling its expenses. It has reduced centralized cost allocations and staff expenses by adjusting employee hours and delaying recruitments. It is focused on enhancing its property-level house profit margins by modifying menus and restaurant hours, besides reviewing and adjusting room amenities. As a result, the company’s expenses are likely to reduce significantly in the forthcoming quarters.

However, weak economic conditions in Europe and slowdown in China continue to be headwinds. Room rate per available room rate growth in Europe will remain sluggish in 2013 as a result of the dismal economic conditions and tough year-over-year comparisons due to the 2012 Olympics in London, the Euro Cup Championship and a strong fair schedule in Germany.

Moreover, management is not very hopeful even on manufacturing markets such as Guangzhou and Shenzhen in China and urban markets like Mumbai in India, which are witnessing weaker demand.

Hence, at the current level, we remain cautious and prefer to take a wait and see approach till we find some more evidence of an outperformance.

Marriot currently retains a Zacks Rank #3 (Hold).

Other Stocks to Consider

Some other hotel industry stocks currently performing well include Choice Hotels International Inc. (CHH - Snapshot Report), Home Inns & Hotels Management Inc. (HMIN - Snapshot Report) and Marriott Vacations Worldwide Corp. (VAC - Snapshot Report). While Home Inns holds a Zacks Rank #1 (Strong Buy), Choice Hotels and Marriott Vacations retain a Zacks Rank #2 (Buy).
 

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
RPC INC RES 24.91 +8.35%
LITHIA MOTO… LAD 94.59 +4.60%
DELTA AIR L… DAL 39.15 +3.90%
FLAMEL TECH… FLML 14.51 +3.50%
SOUTHWEST A… LUV 28.87 +2.92%