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Marriott (MAR) Stock up 30% in a Year: Will the Gain Continue?
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Marriott International, Inc. (MAR - Free Report) has increased 30.2% in the past year compared with the industry's 17.7% growth. The company has been benefiting from robust leisure demand and substantial RevPAR growth. Also, the emphasis on expansion initiatives, digital innovation and the loyalty program bode well.
Although MAR has an impressive long-term earnings growth rate of 17.4%, earnings estimate for 2023 has declined in the past 30 days. Challenging macroeconomic conditions and high debt are a concern.
Image Source: Zacks Investment Research
Let’s delve deeper to find out why investors should retain this stock.
Growth Drivers
Strong Demand & RevPAR Growth: Marriott witnessed robust demand during third-quarter 2023 in the United States, Canada and Asia Pacific region. The company benefited from robust leisure demand and ADR while business transient demand continued to improve. In the United States and Canada, RevPAR increased 4.3% year over year, backed by growth in occupancy (1.1 percentage points year over year) and ADR (2.7%). Internationally, RevPAR grew by 21.8%, with ADR increasing 8.5% and occupancy improving by 7.6 percentage points. The Asia Pacific region experienced particularly strong demand after travel restrictions were lifted.
With global trends improving, MAR anticipates the recovery momentum to continue. Factors such as pent-up demand for travel, a shift in spending towards experiences, sustained employment levels, and the easing of travel restrictions and border openings in most markets are expected to support the company in the coming periods.
Solid Expansion Efforts: Marriott is consistently trying to expand its presence worldwide and capitalize on the demand for hotels in international markets. As of the third quarter of 2023, Marriott's development pipeline totaled 3,200 hotels with approximately 557,000 rooms. More than 238,000 rooms were under construction. During the quarter, the company added 97 properties (17,192 rooms) to its worldwide lodging portfolio.
The company is optimistic concerning the growth strategy and anticipates the deal to support 2023 net room growth expectations of 4.2-4.5% on a year-over-year basis.
Focus on Digital Innovation & Loyalty Program: With almost 192 million members worldwide, MAR utilizes its Marriott Bonvoy loyalty program to support its marketing strategies. The company focuses on non-hotel stay experiences, emphasizing experiences like Eat Around Town and Homes and Villas by Marriott International.
The company's ongoing digital transformation initiative aims to elevate digital experiences through a modern platform. The Marriott Bonvoy mobile app, the preference of most lead members, witnessed a 19% year-over-year increase in downloads during the third quarter of 2023. The company also saw an 11% year-over-year increase in co-brand credit fees for the quarter. This growth was fueled by strong global card spending and the acquisition of new cards during the period.
The company plans to launch the MGM strategic licensing arrangement in early 2024, offering exciting opportunities for Bonvoy customers.
Concerns
In the United States and Europe, the banking environment poses challenges due to rising interest rates. Financing conditions are difficult as some banks await clarity on capital requirements and potential regulations.
The high debt level also poses a concern for the company. As of Sep 30, 2023, total debt amounted to $11.8 billion compared with $11.3 billion reported in the previous quarter. The company ended the third quarter with cash and cash equivalents of $0.7 billion compared with $0.6 billion reported in the previous quarter, which might not be enough to manage the high debt level.
Zacks Rank & Key Picks
Marriott currently carries a Zacks Rank #3 (Hold).
Royal Caribbean Cruises Ltd. (RCL - Free Report) sports a Zacks Rank #1 (Strong Buy). RCL has a trailing four-quarter earnings surprise of 28.3% on average. Shares of RCL have surged 80.8% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for RCL’s 2023 sales and earnings per share (EPS) indicates a rise of 57.6% and 187.1%, respectively, from the year-ago period’s levels.
Live Nation Entertainment, Inc. (LYV - Free Report) carries a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 37.5% on average. Shares of LYV have increased 28.5% in the past year.
The Zacks Consensus Estimate for LYV’s 2023 sales and EPS indicates a rise of 27.3% and 115.6%, respectively, from the year-ago period’s levels.
Skechers U.S.A., Inc. (SKX - Free Report) carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 50.3% on average. Shares of SKX have increased 36% in the past year.
The Zacks Consensus Estimate for SKX’s 2023 sales and EPS indicates a rise of 8.2% and 44.5%, respectively, from the year-ago period’s levels.
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Marriott (MAR) Stock up 30% in a Year: Will the Gain Continue?
Marriott International, Inc. (MAR - Free Report) has increased 30.2% in the past year compared with the industry's 17.7% growth. The company has been benefiting from robust leisure demand and substantial RevPAR growth. Also, the emphasis on expansion initiatives, digital innovation and the loyalty program bode well.
Although MAR has an impressive long-term earnings growth rate of 17.4%, earnings estimate for 2023 has declined in the past 30 days. Challenging macroeconomic conditions and high debt are a concern.
Image Source: Zacks Investment Research
Let’s delve deeper to find out why investors should retain this stock.
Growth Drivers
Strong Demand & RevPAR Growth: Marriott witnessed robust demand during third-quarter 2023 in the United States, Canada and Asia Pacific region. The company benefited from robust leisure demand and ADR while business transient demand continued to improve. In the United States and Canada, RevPAR increased 4.3% year over year, backed by growth in occupancy (1.1 percentage points year over year) and ADR (2.7%). Internationally, RevPAR grew by 21.8%, with ADR increasing 8.5% and occupancy improving by 7.6 percentage points. The Asia Pacific region experienced particularly strong demand after travel restrictions were lifted.
With global trends improving, MAR anticipates the recovery momentum to continue. Factors such as pent-up demand for travel, a shift in spending towards experiences, sustained employment levels, and the easing of travel restrictions and border openings in most markets are expected to support the company in the coming periods.
Solid Expansion Efforts: Marriott is consistently trying to expand its presence worldwide and capitalize on the demand for hotels in international markets. As of the third quarter of 2023, Marriott's development pipeline totaled 3,200 hotels with approximately 557,000 rooms. More than 238,000 rooms were under construction. During the quarter, the company added 97 properties (17,192 rooms) to its worldwide lodging portfolio.
The company is optimistic concerning the growth strategy and anticipates the deal to support 2023 net room growth expectations of 4.2-4.5% on a year-over-year basis.
Focus on Digital Innovation & Loyalty Program: With almost 192 million members worldwide, MAR utilizes its Marriott Bonvoy loyalty program to support its marketing strategies. The company focuses on non-hotel stay experiences, emphasizing experiences like Eat Around Town and Homes and Villas by Marriott International.
The company's ongoing digital transformation initiative aims to elevate digital experiences through a modern platform. The Marriott Bonvoy mobile app, the preference of most lead members, witnessed a 19% year-over-year increase in downloads during the third quarter of 2023. The company also saw an 11% year-over-year increase in co-brand credit fees for the quarter. This growth was fueled by strong global card spending and the acquisition of new cards during the period.
The company plans to launch the MGM strategic licensing arrangement in early 2024, offering exciting opportunities for Bonvoy customers.
Concerns
In the United States and Europe, the banking environment poses challenges due to rising interest rates. Financing conditions are difficult as some banks await clarity on capital requirements and potential regulations.
The high debt level also poses a concern for the company. As of Sep 30, 2023, total debt amounted to $11.8 billion compared with $11.3 billion reported in the previous quarter. The company ended the third quarter with cash and cash equivalents of $0.7 billion compared with $0.6 billion reported in the previous quarter, which might not be enough to manage the high debt level.
Zacks Rank & Key Picks
Marriott currently carries a Zacks Rank #3 (Hold).
Here are some better-ranked stocks from the Zacks Consumer Discretionary sector:
Royal Caribbean Cruises Ltd. (RCL - Free Report) sports a Zacks Rank #1 (Strong Buy). RCL has a trailing four-quarter earnings surprise of 28.3% on average. Shares of RCL have surged 80.8% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for RCL’s 2023 sales and earnings per share (EPS) indicates a rise of 57.6% and 187.1%, respectively, from the year-ago period’s levels.
Live Nation Entertainment, Inc. (LYV - Free Report) carries a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 37.5% on average. Shares of LYV have increased 28.5% in the past year.
The Zacks Consensus Estimate for LYV’s 2023 sales and EPS indicates a rise of 27.3% and 115.6%, respectively, from the year-ago period’s levels.
Skechers U.S.A., Inc. (SKX - Free Report) carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 50.3% on average. Shares of SKX have increased 36% in the past year.
The Zacks Consensus Estimate for SKX’s 2023 sales and EPS indicates a rise of 8.2% and 44.5%, respectively, from the year-ago period’s levels.