Marriott International (MAR) Earnings Alert: Buy or Sell Signals?

Marriott International, Inc. (MAR) is scheduled to report its fourth-quarter and full-year results on February 13. Wall Street expects the company to post higher earnings and revenue over the prior-year quarter. In this piece, I have discussed why it could be wise to wait for a better entry point in the stock despite the potential rise in earnings and revenue for the quarter.

For the fourth quarter, MAR’s EPS and revenue are expected to increase 8.3% and 4.7% year-over-year to $2.12 and $6.20 billion, respectively. The company has a stellar earnings history, having beaten the consensus EPS estimate in each of the trailing four quarters.

The company reported solid earnings and revenue during the third quarter. MAR added 97 properties (17,192 rooms) to its worldwide lodging portfolio during the third quarter, including nearly 13,000 rooms in international markets and more than 4,900 conversion rooms. However, eleven properties (1,494 rooms) exited MAR’s portfolio during the quarter.

At the end of the third quarter, MAR’s global lodging system totaled nearly 8,700 properties, with approximately 1,581,000 rooms. Also, its worldwide development pipeline totaled 3,239 properties with nearly 557,000 rooms, including 24 properties with roughly 40,300 rooms approved for development but not yet subject to signed contracts.

The pipeline includes 1,081 properties with approximately 238,000 rooms under construction, or 43%, including approximately 37,000 rooms from the MGM deal. Its worldwide RevPAR during the third quarter increased 8.8% compared to the year-ago quarter. Its RevPAR in the U.S. and Canada rose 4.3%, and RevPAR in international markets rose 21.8%.

At the end of the third quarter, its total debt was $11.80 billion, compared to $10.10 billion for the fiscal year ended December 31, 2022. For fiscal 2023, MAR raised its estimates for worldwide RevPAR growth guidance to between 14% and 15% year-over-year. Its U.S. & Canada RevPAR growth is expected to grow between 8% and 9% year-over-year, and International RevPAR growth is expected to increase between 31% and 32%.

Meanwhile, its net room growth is expected to grow between 4.2% and 4.5%. Its worldwide RevPAR growth for the fourth quarter is expected to be between 6% and 7.5% year-over-year. In addition, its U.S. & Canada RevPAR growth is expected to grow between 3% and 4% year-over-year, and International RevPAR growth is expected to increase between 14% and 16%.

For the fourth quarter, MAR’s gross fee revenues are expected to come between $1,185 million and $1,215 million. Its adjusted EBITDA is expected to be between $1,115 million and $1,150 million, and its adjusted EPS is expected to be between $2.04 and $2.13. The company’s gross fee revenues for fiscal 2023 are expected to come between $4,765 million and $4,795 million.

In addition, its adjusted EBITDA for the entire year is expected to come between $4,574 million and $4,609 million, and its adjusted EPS is expected between $8.50 and $8.59.

MAR’s stock has gained 38% over the past nine months and 41.2% over the past year to close the last trading session at $247.02.

Here’s what you might want to consider ahead of its upcoming earnings release:

Robust Financials

MAR’s total revenues for the fiscal third quarter that ended September 30, 2023, rose 11.6% year-over-year to $5.93 billion. Its net fee revenues increased 13.2% over the prior-year quarter to $1.17 billion. The company’s adjusted operating income increased 17.7% year-over-year to $959 million.

In addition, its adjusted net income rose 15.1% year-over-year to $634 million. Also, its adjusted EPS came in at $2.11, representing an increase of 24.9% year-over-year.

Favorable Analyst Estimates

Analysts expect MAR’s EPS and revenue for fiscal 2023 to increase 28.4% and 15% year-over-year to $8.59 and $23.88 billion, respectively. Its fiscal 2024 EPS and revenue are expected to increase 12.7% and 7.4% year-over-year to $9.69 and $25.64 billion, respectively.

Stretched Valuation

In terms of forward non-GAAP P/E, MAR’s 28.75x is 78.8% higher than the 16.08x industry average. Its 1.84x forward non-GAAP PEG is 13% higher than the 1.63x industry average. Likewise, its 18.38x forward EV/EBITDA is 82.6% higher than the 10.07x industry average.

Mixed Profitability

In terms of the trailing-12-month EBITDA margin, MAR’s 72.27% is 565.6% higher than the 10.86% industry average. Likewise, its 35.53x trailing-12-month levered FCF margin is 549% higher than the industry average of 5.48x. Also, its 7.48% trailing-12-month Capex/Sales is 144.6% higher than the industry average of 3.06%.

On the other hand, MAR’s 0.24x trailing-12-month asset turnover ratio is 75% lower than the 0.98x industry average.

POWR Ratings Reflect Uncertainty

MAR has an overall rating of C, equating to a Neutral in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. MAR has a D grade for Value, consistent with its stretched valuation. Its 1.64 beta justifies its C grade for Stability.

It has a C grade for Quality, in sync with its mixed stability.

MAR is ranked #14 out of 19 stocks in the Travel – Hotels/Resorts industry. Click here to access MAR’s Growth, Momentum, and Sentiment ratings.

Bottom Line

Owing to its favorable business momentum around the world, MAR is expected to end fiscal 2023 on a solid note. The company boosted its RevPAR guidance for the whole year. It announced the achievement of strong net room growth of 4.7% in 2023. MAR currently has a solid portfolio spread across luxury, affordable midscale, and branded residences, helping provide more opportunities for owners, franchisees, and guests.

Despite the positive developments, MAR is trading at an expensive valuation. Given its mixed profitability and stability, it could be wise to wait for a better entry point in the stock.

How Does Marriott International, Inc. (MAR) Stack Up Against Its Peers?

MAR has an overall POWR Rating of C, equating to a Neutral rating. You may check out these A and B-rated stocks within the Travel – Hotels/Resorts industry: Genting Berhad (GEBHY), Atour Lifestyle Holdings Limited (ATAT), and Travel + Leisure Co. (TNL). For exploring more Buy-rated Travel – Hotels/Resorts stocks, click here.

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MAR shares were trading at $246.08 per share on Monday morning, down $0.94 (-0.38%). Year-to-date, MAR has gained 9.12%, versus a 5.48% rise in the benchmark S&P 500 index during the same period.

Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.

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