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Bear of the Day: Marriott International, Inc. (MAR)

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Marriott (MAR - Free Report) shares have tumbled 60% in 2020 as the coronavirus pandemic brings the travel and hotel industries to a near halt. The current conditions are clearly out of Marriott’s control. Nonetheless, the world’s largest hotel company said in March that it is starting to furlough employees as part of its effort to maintain liquidity.

Tough Times

Marriott has already started to furlough what it said will likely be tens of thousands of employees. This includes not only hotel managers and housekeepers, but also corporate staff.

Marriot noted in a March 18 release that its occupancy levels in North America and Europe had fallen below 25% over the last few days, against roughly 70% a year ago.

Looking ahead, Marriott thinks it will “see further erosion in performance in the weeks ahead and does not expect to see material improvement until there is a sense that the spread of the virus has moderated.” And the firm has already seen “historically high levels” of cancellations for stays through the first half of 2020.

On the positive side, Marriott said that it hasn’t seen any “meaningful group cancellations for 2021 related to COVID-19, and many group customers are at least tentatively rebooking for later in 2020.”







Other Fundamentals

MAR stock has tumbled 60% so far in 2020 and it closed regular trading Thursday at $63 per share. Fellow hotel giant Hilton (HLT - Free Report) stock is down nearly 50% YTD, with Hyatt (H - Free Report) shares down 55%.

Marriott is now trading at 2016 levels. But the uncertainty makes even its discounted price hard to touch for now, until there are at least some signs that people are going to be able to return to hotels sometime soon.

Marriott is currently trying to preserve liquidity. The company noted that it has a “$4.5 billion revolving credit facility that expires in June 2024 to provide liquidity when needed.” And as of March 17, the hotel powerhouse had already “drawn down $2.5 billion primarily to support commercial paper maturities.”

The firm said that it can also hold on to cash by “reducing or eliminating share repurchases, suspending the cash dividend, reducing payroll and other costs and cutting back investment spending.” Marriot said that it hasn’t repurchased shares in 2020 “other than the $150 million of share repurchases reported” in its February 26 press release. Plus, MAR now “anticipates that its previously announced first quarter 2020 dividend, payable on March 31, will be the last until conditions improve.”






Bottom Line

The nearby chart shows that Marriott’s earnings revisions have tumbled recently, which helps it hold a Zacks Rank #5 (Strong Sell) right now. Worse still, the company withdrew “all aspects of its outlook and assumptions for 2020” that it laid out on February 26.

Amid the total uncertainty surrounding the continued spread of the coronavirus, investors should likely stay away from MAR stock, and most of its travel, hotel, and hospitality peers. Plus, Marriott is currently looking into its third data breach in the last 18 months.

All that said, investors might want to keep an eye on MAR stock as it likely continues to fall, because when travel appears to be set to return to even a semi-normal state, Marriott could be ready for a big bounce back.

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Marriott International, Inc. (MAR) - free report >>

Hilton Worldwide Holdings Inc. (HLT) - free report >>

Hyatt Hotels Corporation (H) - free report >>