Marriott (MAR) Grows on Strong Demand, Concerns Remain - Analyst Blog

On Mar 20, 2015, we issued an updated research report on Marriott International, Inc.MAR .

Marriott International posted strong fourth quarter 2014 results on Feb 18. Adjusted earnings of 68 cents per share beat the Zacks Consensus Estimate by 4.6% and were up 39% year over year. Also, earnings beat management's guidance range of 62 to 66 cents per share.

The upside reflects solid revenue per available room (RevPAR) and strong margins. Total revenue increased 11% year over year to $3.56 billion owing to strong demand in its North America business. It also beat the Zacks Consensus Estimate by 2.7%. Revenues increased at all its segments.

Owing to an increase in demand, occupancy rate and average daily rate improved significantly in the domestic market as well as internationally. In the fourth quarter, RevPAR for worldwide comparable system-wide properties grew 6.2%, within management's expectation of a 5% to 7% increase, driven by a 3.7% rise in average daily rate (ADR).

Given its property locations and strong brand recognition, the company is well poised to benefit from higher market demand on the back of stepped-up business traveling in major North American and international locations. Amid expectation for improving demand, the company projects adjusted earnings per share in the range of $3.00 to $3.12 in 2015, up 18% to 23% year over year.

The company expects worldwide comparable system-wide RevPAR and comparable system-wide RevPAR in North America to increase in the range of 5% to 7%. International system-wide RevPAR is expected to increase in the range of 3% to 5% in 2015.

Meanwhile, Marriott is consistently trying to expand its presence worldwide and has expansion plans for Asia, Middle East, Europe and Latin America.

However, owing to international expansion, the company remains vulnerable to headwinds in the regions where it operates. Despite immense growth potential, a sluggish economy in Brazil and Argentina are weighing on demand. Moreover, uncertainty in Middle East, macroeconomic factors in Venezuela and government austerity and the ensuing slowdown in China are expected to dampen revenues. Meanwhile, Japan is experiencing pressure owing to a rise in taxes in the region, which might hurt revenues of the brand.

In fact, other hoteliers like Wyndham Worldwide Corp. WYN , Hyatt Hotels Corp. H , and Starwood Hotels and Resorts Worldwide Inc. HOT are also facing troubles in these regions.

Marriott presently has a Zacks Rank #3 (Hold).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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