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Marriott (MAR) Surges 18% YTD: Can the Bull Run Continue?

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The year 2019 has so far turned out to be a good one for the Hotels and Motels industry. Year to date, the industry has rallied 18.9% compared with the S&P 500’s 13.7% increase. Marriott International, Inc. (MAR - Free Report) , which belong to the same industry, has also gained 18.1% in the same time frame. Notably, Marriott continues to benefit from the Starwood acquisition, sizeable international exposure and an attractive brand position. However, lower-than-expected revenues for the five straight quarters are concerning. Let’s delve deeper.

Key Catalysts

Marriott continues to impress investors with solid its bottom-line performance. In first-quarter 2019, the company’s adjusted earnings of $1.41 per share surpassed the Zacks Consensus Estimate of $1.34 and increased 5% year over year. Notably, Marriott’s earnings topped the consensus mark for 21 straight quarters. For second-quarter 2019, the company expects earnings of $1.52-$1.58 per share compared with adjusted earnings of $1.73 registered in second-quarter 2018.

Furthermore, Marriott has brands that own more than 7,000 properties in 131 countries and territories. This makes it a leading company in the luxury and lifestyle space. Moreover, the company's extensive portfolio and a strong brand position allow it to charge a premium room rate in the highly competitive lodging industry.

Given its property locations, we believe that Marriott is well-poised to benefit from the increasing market demand backed by stepped-up business as well as leisure traveling in major North American and international locations. RevPAR in North America rose 0.8% in the first quarter. Given steady rise in business and leisure travel, and higher transaction volume, Marriott is expected to perform well in the near as well as the long term. With global travel estimated to increase at a 7% compounded rate over the next 10 years, international trips are anticipated to top 1.8 billion by 2030.



These apart, Marriott and Expedia Group have signed a fresh multi-year agreement for the listing of Marriot’s hotel chains on the latter’s website. Reportedly, the negotiation began November 2018. The deal will help travelers to make a booking at Marriott hotels worldwide via the Expedia site. This is an important deal for Marriott as online booking is becoming important in the lodging business and is a major growth driver. Markedly, this is the first deal between the two companies after Marriott acquired Starwood and became the world's largest hotel company in 2016.

Concerns

Marriott’s lower-than-expected top-line performances over the past five quarters have been concerning for investors. In first-quarter 2019, total revenues of $5,012 million missed the Zacks Consensus Estimate of $5,117 million. The metric also fell short of the consensus mark in the trailing four quarters, the average being 7.5%.

On the earnings front, the consensus estimate for the current quarter and year has moved south by 7 cents and 3 cents to $1.57 and $6.09, respectively, over the past 30 days.

Zacks Rank & Key Picks

Marriott, which shares space with Hyatt Hotels Corporation (H - Free Report) , has a Zacks Rank #3 (Hold). Better-ranked stocks worth considering in the same space include Red Lion Hotels Corporation (RLH - Free Report) and Wyndham Destinations, Inc. (WYND - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Red Lion Hotels’ bottom line for the current year is likely to increase 102.2%.

Wyndham Destinations reported better-than-expected earnings in each of the trailing four quarters, the average being 5.9%.

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