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On Jan 2, we issued an updated research report on Marriott International, Inc. (MAR - Free Report) .
Starwood Acquisition
After announcing the acquisition of Starwood Hotels & Resorts on Sep 23, Marriott has become the world’s largest hotel company, spanning across 120 countries with over 6,000 properties. Shares of the company have gained nearly 21% since the date while Marriott’s peer group has gained 8.6% in the same time frame, depicting the positive effect of the acquisition.
With the completion of this acquisition, Marriott's distribution has more than doubled in Asia and the Middle East & Africa combined. Also, the merger is expected to result in a bigger brand with increased scale and a robust development pipeline in the long run. Marriott believes that the deal will be accretive to cash flow and earnings by the second year following closure and result in annual cost savings of at least $250 million on the back of lower operating, and general & administrative expenses.
Other Prospects
With the boost in the economy and an improvement in business and leisure travel, Marriott is well poised to grow in the near as well as long term, in major North American and international locations.
Meanwhile, Marriott is consistently trying to expand its presence worldwide and capitalize on the demand for hotels in the international markets. The company anticipated gross room additions of 6% in 2016.
The hotel company is also trying to expand its footprint outside the U.S., especially in Asia, Latin America, Middle East and Africa. In addition to the consistently growing European pipeline, the company expects its distribution in the Caribbean and Latin American region too to increase 75% by 2018.
Moreover, digital innovations and social media are starting to play an increasingly important role in bookings, by connecting directly with guests, which in turn can lead to increased loyalty and market share.
The company also believes that the linking of three industry-leading guest loyalty programs – Marriott Rewards, Ritz-Carlton Rewards and Starwood Preferred Guest –would lead to an even larger loyalty community.
Most importantly, frequent share buybacks and continuous increase in quarterly dividend payments affirm the company’s optimistic outlook and growth prospects.
Risks Faced
Despite immense growth potential, a sluggish economy in Brazil is weighing on demand in the Latin American region. In the Middle East, political unrest and low oil prices continue to hurt tourism. Moreover, the slowdown in the Chinese economy is hurting discretionary spending and, in turn, travel. Also, Marriott expects pandemic virus like Zika to continue to temper growth in the Caribbean region.
Meanwhile, in the domestic market, the company is facing increased competition in New York due to oversupply of hotels. Further, soft demand in the oil producing regions is expected to continue hurting RevPAR (Revenue per Available Room).
In Europe too, economic/political conditions are expected to remain challenging post-Brexit. Given Marriott’s considerable presence in Europe, this might limit its business growth. Additionally, soft economic conditions in France, weak demand in Russia as well terror threats in some major locations are expected to hurt revenues of the company.
On the other hand, Marriott’s considerable international presence makes it highly vulnerable to fluctuations in exchange rates. Significant currency headwinds are also affecting most of the other hoteliers across the world, including Hyatt Hotels Corporation (H - Free Report) , Hilton Worldwide Holdings (HLT - Free Report) , Wyndham Worldwide Corporation , etc. This volatility is expected to prevail in the near term.
Bottom Line
Due to all these factors, estimates for the company’s earnings have been moving down over the past few days. Resultantly, current quarter and current year estimates have been revised downward by 4.6% and 3.6%, respectively, over the last 60 days, reflecting some anticipation in analysts’ minds.
However, we believe that after sorting out the integration challenges posed by acquisitions in general, this Zacks Rank #3 (Hold) company is well poised to grow in the long term, despite the headwinds.
In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?
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Marriott (MAR): Long-Term View Bright Despite Headwinds
On Jan 2, we issued an updated research report on Marriott International, Inc. (MAR - Free Report) .
Starwood Acquisition
After announcing the acquisition of Starwood Hotels & Resorts on Sep 23, Marriott has become the world’s largest hotel company, spanning across 120 countries with over 6,000 properties. Shares of the company have gained nearly 21% since the date while Marriott’s peer group has gained 8.6% in the same time frame, depicting the positive effect of the acquisition.
With the completion of this acquisition, Marriott's distribution has more than doubled in Asia and the Middle East & Africa combined. Also, the merger is expected to result in a bigger brand with increased scale and a robust development pipeline in the long run. Marriott believes that the deal will be accretive to cash flow and earnings by the second year following closure and result in annual cost savings of at least $250 million on the back of lower operating, and general & administrative expenses.
Other Prospects
With the boost in the economy and an improvement in business and leisure travel, Marriott is well poised to grow in the near as well as long term, in major North American and international locations.
Meanwhile, Marriott is consistently trying to expand its presence worldwide and capitalize on the demand for hotels in the international markets. The company anticipated gross room additions of 6% in 2016.
The hotel company is also trying to expand its footprint outside the U.S., especially in Asia, Latin America, Middle East and Africa. In addition to the consistently growing European pipeline, the company expects its distribution in the Caribbean and Latin American region too to increase 75% by 2018.
Moreover, digital innovations and social media are starting to play an increasingly important role in bookings, by connecting directly with guests, which in turn can lead to increased loyalty and market share.
The company also believes that the linking of three industry-leading guest loyalty programs – Marriott Rewards, Ritz-Carlton Rewards and Starwood Preferred Guest –would lead to an even larger loyalty community.
Most importantly, frequent share buybacks and continuous increase in quarterly dividend payments affirm the company’s optimistic outlook and growth prospects.
Risks Faced
Despite immense growth potential, a sluggish economy in Brazil is weighing on demand in the Latin American region. In the Middle East, political unrest and low oil prices continue to hurt tourism. Moreover, the slowdown in the Chinese economy is hurting discretionary spending and, in turn, travel. Also, Marriott expects pandemic virus like Zika to continue to temper growth in the Caribbean region.
Meanwhile, in the domestic market, the company is facing increased competition in New York due to oversupply of hotels. Further, soft demand in the oil producing regions is expected to continue hurting RevPAR (Revenue per Available Room).
In Europe too, economic/political conditions are expected to remain challenging post-Brexit. Given Marriott’s considerable presence in Europe, this might limit its business growth. Additionally, soft economic conditions in France, weak demand in Russia as well terror threats in some major locations are expected to hurt revenues of the company.
On the other hand, Marriott’s considerable international presence makes it highly vulnerable to fluctuations in exchange rates. Significant currency headwinds are also affecting most of the other hoteliers across the world, including Hyatt Hotels Corporation (H - Free Report) , Hilton Worldwide Holdings (HLT - Free Report) , Wyndham Worldwide Corporation , etc. This volatility is expected to prevail in the near term.
Bottom Line
Due to all these factors, estimates for the company’s earnings have been moving down over the past few days. Resultantly, current quarter and current year estimates have been revised downward by 4.6% and 3.6%, respectively, over the last 60 days, reflecting some anticipation in analysts’ minds.
However, we believe that after sorting out the integration challenges posed by acquisitions in general, this Zacks Rank #3 (Hold) company is well poised to grow in the long term, despite the headwinds.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?
Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>