On Sep 26, 2014, we issued an updated research report on Marriott International Inc. (MAR).
On Jul 29, 2014, the company posted mixed second quarter 2014 results with earnings beating the Zacks Consensus Estimate but revenues missing the same. However, the company raised its revenue per available room (RevPar) outlook for 2014 for the second consecutive quarter based on better-than-expected numbers.
Adjusted earnings of 71 cents were up 24.6% year over year and were also above management’s guidance range. The upside reflects an increase in occupancy and room rates worldwide. Revenues also increased 6.8% year over year to $3.48 billion driven by an increase in revenues at all its segments and solid RevPar growth.
With the economy beginning to improve gradually, the U.S. hotel industry has started to grow. Marriott is also progressing well on the back of a growing North American business, significant international exposure and an aggressive buyback strategy. With the boost in the economic sector and an improving travel and tourism industry, Marriott is well poised for growth in the second half. Meanwhile, its asset disposition strategy helps it to strengthen financial flexibility.
Nowadays, social media plays a huge role in enhancing a brand’s prospects by connecting directly with customers. This leads to increased loyalty and market share. The Marriott mobile app for tablets and smartphones are also helping guests to manage their bookings, access interactive maps/GPS as well as reward programs. In fact, over the last 12 months, the company has recorded over $1.6 billion of mobile reservations.
However, we would like to remind investors that the company is facing broader macro concerns in the countries where Marriott operates. A deteriorating political situation and a sluggish economy in Brazil and Chile continue to weigh on demand in these regions. Moreover, the political turmoil in Thailand, Argentine currency devaluation, visa restrictions and concerns about the corona virus in Saudi Arabia, and Vietnam’s dispute with China further add to the woes. In fact, other hoteliers like Starwood Hotels and Resorts Worldwide Inc. (HOT), Hyatt Hotels Corporation (H) and Wyndham Worldwide Corporation (WYN) are also facing the brunt of troubles noticed in these regions.
Marriott has considerable international presence and is therefore highly vulnerable to fluctuations in exchange rates. Of late, the peso devaluation and abrupt weakening of the yen, the Aussie dollar, rupee and the rupiah have been headwinds for the company. Moreover, the company is also bearing the brunt of Venezuelan currency devaluation. Going forward, such volatility in exchange rates would remain a concern for the company.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment