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Marriott (MAR) Up 51% YTD: Will the Bull Run Continue in 2024?
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Marriott International, Inc. (MAR - Free Report) has demonstrated impressive performance in 2023, with its shares registering a remarkable 50.5% year-to-date rally, surpassing the industry's growth of 30.9%. The company is benefiting from strong leisure demand and positive global booking trends.
The Zacks Rank #3 (Hold) company’s earnings and sales in 2024 are likely to increase 13.8% and 6.9% year over year, respectively. It has an impressive long-term earnings growth rate of 17.4%. However, macroeconomic concerns and high debt remain headwinds.
Growth Drivers
MAR witnessed robust demand during third-quarter 2023 in the United States, Canada and Asia Pacific region. It gained from robust leisure demand and ADR while business transient demand continued to improve. In the third quarter, global demand for hotels surged across all regions.
In the United States and Canada, RevPAR rose 4.3% year over year, backed by growth in occupancy (1.1 percentage points year over year) and ADR (2.7%). Internationally, RevPAR grew by 21.8%, with ADR increasing by 8.5% and occupancy improving 7.6 percentage points. The Asia Pacific region experienced particularly strong demand after travel restrictions were lifted.
During the third quarter, Marriott witnessed a seasonally higher level of leisure transient travel, accounting for 45% of global room nights, accompanied by a 4% rise in ADR compared with the previous year’s levels. Additionally, group demand showed impressive strength, with group revenues in the United States and Canada rising 5% year over year. At the end of third-quarter 2023, group revenues for 2023 and 2024 were up 19% and 14%, respectively, on a year-over-year basis.
Marriott is trying to strengthen its presence outside the United States, especially in Asia, Latin America, the Middle East and Africa. The company’s European pipeline has grown consistently in the recent past and is expected to continue going forward.
As of the third quarter of 2023, Marriott's development pipeline totaled 3,200 hotels with approximately 557,000 rooms. More than 238,000 rooms were under construction. During the quarter, it added 97 properties (17,192 rooms) to its worldwide lodging portfolio.
MAR has been actively promoting its Bonvoy collaborations, such as Uber, Eat Around Town, and co-branded credit cards available in 11 countries. Management also plans to launch the MGM strategic licensing arrangement in early 2024, offering exciting opportunities for Bonvoy customers.
For 2023, the company anticipates a 5% year-over-year increase in total non-RevPAR-related fees driven by a roughly 10% rise in credit card fees. This reflects strong growth and average spending among cardholders. However, lower residential branding fees compared with the peak levels in 2022 will partially offset these gains.
Image Source: Zacks Investment Research
Concerns
The banking environment in the United States and Europe has been challenging due to rising interest rates. Financing conditions in these regions have been challenging, with some banks waiting for more clarity on capital requirements and potential regulations. Despite lending challenges, deals with committed financing are still progressing and there hasn't been a significant increase in deals falling through the pipeline.
High debt is also a concern. As of Sep 30, 2023, the company’s total debt amounted to $11.8 billion compared with $11.3 billion reported in the previous quarter. Its times interest earned ratio at the end of third-quarter 2023 came in at 8x, down from 8.4x reported in the previous quarter. It ended the third quarter with cash and cash equivalents of $0.7 billion compared with $0.6 billion reported in the previous quarter, which might not be enough to manage the high debt level.
Live Nation Entertainment, Inc. (LYV - Free Report) flaunts a Zacks Rank #1 (Strong Buy). It has a trailing four-quarter earnings surprise of 37.5% on average. Shares of LYV have increased 34.9% in the past year.
Royal Caribbean Cruises Ltd. (RCL - Free Report) carries a Zacks Rank #2 (Buy). RCL has a trailing four-quarter earnings surprise of 28.3% on average. RCL’s shares have surged 162.9% in the past year.
The Zacks Consensus Estimate for RCL’s 2023 sales and earnings per share (EPS) indicates a rise of 57.7% and 187.9%, respectively, from the year-ago levels.
Stride, Inc. (LRN - Free Report) carries a Zacks Rank #2. It has a trailing four-quarter earnings surprise of 44.3% on average. Shares of LRN have soared 89.8% in the past year.
The Zacks Consensus Estimate for LRN’s 2024 sales and EPS implies an improvement of 9.1% and 34.7%, respectively, from the prior-year levels.
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Marriott (MAR) Up 51% YTD: Will the Bull Run Continue in 2024?
Marriott International, Inc. (MAR - Free Report) has demonstrated impressive performance in 2023, with its shares registering a remarkable 50.5% year-to-date rally, surpassing the industry's growth of 30.9%. The company is benefiting from strong leisure demand and positive global booking trends.
The Zacks Rank #3 (Hold) company’s earnings and sales in 2024 are likely to increase 13.8% and 6.9% year over year, respectively. It has an impressive long-term earnings growth rate of 17.4%. However, macroeconomic concerns and high debt remain headwinds.
Growth Drivers
MAR witnessed robust demand during third-quarter 2023 in the United States, Canada and Asia Pacific region. It gained from robust leisure demand and ADR while business transient demand continued to improve. In the third quarter, global demand for hotels surged across all regions.
In the United States and Canada, RevPAR rose 4.3% year over year, backed by growth in occupancy (1.1 percentage points year over year) and ADR (2.7%). Internationally, RevPAR grew by 21.8%, with ADR increasing by 8.5% and occupancy improving 7.6 percentage points. The Asia Pacific region experienced particularly strong demand after travel restrictions were lifted.
During the third quarter, Marriott witnessed a seasonally higher level of leisure transient travel, accounting for 45% of global room nights, accompanied by a 4% rise in ADR compared with the previous year’s levels. Additionally, group demand showed impressive strength, with group revenues in the United States and Canada rising 5% year over year. At the end of third-quarter 2023, group revenues for 2023 and 2024 were up 19% and 14%, respectively, on a year-over-year basis.
Marriott is trying to strengthen its presence outside the United States, especially in Asia, Latin America, the Middle East and Africa. The company’s European pipeline has grown consistently in the recent past and is expected to continue going forward.
As of the third quarter of 2023, Marriott's development pipeline totaled 3,200 hotels with approximately 557,000 rooms. More than 238,000 rooms were under construction. During the quarter, it added 97 properties (17,192 rooms) to its worldwide lodging portfolio.
MAR has been actively promoting its Bonvoy collaborations, such as Uber, Eat Around Town, and co-branded credit cards available in 11 countries. Management also plans to launch the MGM strategic licensing arrangement in early 2024, offering exciting opportunities for Bonvoy customers.
For 2023, the company anticipates a 5% year-over-year increase in total non-RevPAR-related fees driven by a roughly 10% rise in credit card fees. This reflects strong growth and average spending among cardholders. However, lower residential branding fees compared with the peak levels in 2022 will partially offset these gains.
Image Source: Zacks Investment Research
Concerns
The banking environment in the United States and Europe has been challenging due to rising interest rates. Financing conditions in these regions have been challenging, with some banks waiting for more clarity on capital requirements and potential regulations. Despite lending challenges, deals with committed financing are still progressing and there hasn't been a significant increase in deals falling through the pipeline.
High debt is also a concern. As of Sep 30, 2023, the company’s total debt amounted to $11.8 billion compared with $11.3 billion reported in the previous quarter. Its times interest earned ratio at the end of third-quarter 2023 came in at 8x, down from 8.4x reported in the previous quarter. It ended the third quarter with cash and cash equivalents of $0.7 billion compared with $0.6 billion reported in the previous quarter, which might not be enough to manage the high debt level.
Key Picks
Here are some better-ranked stocks from the Zacks Consumer Discretionary sector:
Live Nation Entertainment, Inc. (LYV - Free Report) flaunts a Zacks Rank #1 (Strong Buy). It has a trailing four-quarter earnings surprise of 37.5% on average. Shares of LYV have increased 34.9% in the past year.
The Zacks Consensus Estimate for LYV’s 2023 sales and EPS suggests growth of 29.5% and 132.8%, respectively, from the year-earlier levels. You can see the complete list of today’s Zacks #1 Rank stocks here.
Royal Caribbean Cruises Ltd. (RCL - Free Report) carries a Zacks Rank #2 (Buy). RCL has a trailing four-quarter earnings surprise of 28.3% on average. RCL’s shares have surged 162.9% in the past year.
The Zacks Consensus Estimate for RCL’s 2023 sales and earnings per share (EPS) indicates a rise of 57.7% and 187.9%, respectively, from the year-ago levels.
Stride, Inc. (LRN - Free Report) carries a Zacks Rank #2. It has a trailing four-quarter earnings surprise of 44.3% on average. Shares of LRN have soared 89.8% in the past year.
The Zacks Consensus Estimate for LRN’s 2024 sales and EPS implies an improvement of 9.1% and 34.7%, respectively, from the prior-year levels.