We remain Neutral on one of the leading hospitality companies,
Marriott International, Inc.
), following mixed second-quarter 2013 results. While the
company's earnings in the second quarter were in line with the
Zacks Consensus Estimate, its sales beat the same.
Why the Reiteration?
On Jul 31, Marriott posted second-quarter 2013 earnings of 57
cents per share which were in line with the Zacks Consensus
Estimate but above the year-ago level of 42 cents by 35.7%. The
year-over-year rise in the earnings was led by the company's
higher top line, margin expansion and lower share count from
share buyback activities.
Total revenue was up 18% year over year to $3.26 billion and
also beat the Zacks Consensus Estimate of $3.23 billion by nearly
1%. Marriott's growing North American business and continued
expansion of its lodging properties helped drive revenues during
Overall, we remain encouraged by the company's wide brand
portfolio, consistent expansion strategy and its venture into the
economy segment. Since 2009, the company's hotel system size has
increased 12%. A significant portion of the company's properties
is situated outside the U.S. including Asia, Middle East, Europe
and Latin America, which ensures wide international exposure. At
the end of the second quarter of 2013, Marriott had approximately
3,847 properties with 666,132 rooms. The company expects to add
30,000 rooms globally in 2013.
Asset sale is another sweet spot for the company. Marriott is
going to sell three Edition-branded hotels (located in London,
Miami Beach and Manhattan) for $800 million. These properties,
currently under construction, are expected to be ready for sale
by 2015. Marriott would continue to manage the properties post
sale. The asset sale is part of the company's long-term strategy
to strengthen its financial flexibility, which in turn will
maximize shareholders' value.
Despite these enthusiastic facts, some concerns prevent us
from being too optimistic on the stock. In the recently concluded
second quarter, the company lowered its earnings guidance to a
range of $1.92-$2.03 from the previous estimate of $1.93-$2.08
owing to the expected increase in general, administrative and
other costs and lower operating income. For 2013, the company
also trimmed its revenue per available room (RevPAR) outlook due
to sluggish economic growth in Europe and in some areas in the
According to management, government austerity, geo-political
tension and weak economic condition in China remain near-term
concerns. In addition, we remain skeptical about the budget
sequestration in the U.S., effective since Mar 1, 2013, that may
hamper the Zacks Rank #3 (Hold) company's business momentum in
the country to some extent.
Other Stocks to Consider
Some other hoteliers that are worth considering at the current
Hyatt Hotels Corporation
Marriott Vacations Worldwide Corp.
China Lodging Group, Limited
). All these stocks carry a Zacks Rank #2 (Buy).
HYATT HOTELS CP (H): Free Stock Analysis
CHINA LODGING (HTHT): Free Stock Analysis
MARRIOTT INTL-A (MAR): Free Stock Analysis
MARRIOT VAC WW (VAC): Free Stock Analysis
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