We maintain our Neutral recommendation on
Marriott International Inc.
). 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
Marriot currently retains a Zacks Rank #3 (Hold).
CHOICE HTL INTL (CHH): Free Stock Analysis
HOME INNS&HOTEL (HMIN): Free Stock Analysis
MARRIOTT INTL-A (MAR): Free Stock Analysis
MARRIOT VAC WW (VAC): Free Stock Analysis
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Other Stocks to Consider
Some other hotel industry stocks currently performing well
Choice Hotels International Inc.
Home Inns & Hotels Management Inc.
Marriott Vacations Worldwide Corp.
). While Home Inns holds a Zacks Rank #1 (Strong Buy), Choice
Hotels and Marriott Vacations retain a Zacks Rank #2 (Buy).