On Thursday, Mizuho adjusted its outlook on shares of Marriott International (NASDAQ:MAR), reducing the price target to $233 from $265, while maintaining a neutral stance on the stock. The revision followed Marriott's second-quarter financial performance, which surpassed expectations.
The hotel giant reported an adjusted EBITDA of $1.324 billion, which was above the analyst's projection of $1.303 billion, the consensus estimate of $1.308 billion, and within the company's own guidance range of $1.295 billion to $1.315 billion.
Marriott's systemwide worldwide revenue per available room (RevPAR) increased by 4.9%, which was also better than Mizuho's forecast of 4.4% and the street's 4.5%. Despite these positive indicators, the company has revised its full-year 2024 RevPAR growth outlook to between 3% and 4%, down from the previous range of 3% to 5%. This updated guidance falls short of Mizuho's expectation of a 3.6% increase and the street's 3.8% prediction.
The report detailed mixed year-over-year fee growth results. Franchise Fees grew by 10.7%, surpassing both Mizuho's 9.4% estimate and the street's 9.3% prediction. However, the Base Management Fee only saw a 3.8% increase, which was below the 7.1% Mizuho expected and the 6.3% street forecast. The Incentive Management Fee's growth was at 1%, significantly trailing Mizuho's 4.2% and the street's 5.1% projections.
Mizuho expressed three primary concerns that influenced their decision to maintain a neutral rating on Marriott's stock: the slowdown in China, a deceleration in hotel leisure spending, and questions regarding the sustainability of Marriott's earnings algorithm. These factors contributed to the firm's decision to lower the price target for Marriott International's shares.
In other recent news, Marriott International reported solid second-quarter performance in 2024, with net room growth of 6% year-over-year and nearly 5% increase in global revenue per available room (RevPAR).
Despite facing macroeconomic challenges in Greater China leading to a decline in RevPAR, the company showed strong international growth, especially in the Asia Pacific region, excluding China. However, Marriott has adjusted its full-year RevPAR growth outlook to 3-4% and plans to return approximately $4.3 billion to shareholders.
Marriott's loyalty program also saw a significant surge, now boasting over 210 million members. The company added approximately 15,500 net rooms in Q2, with a pipeline of over 559,000 rooms. Gross fee revenues and adjusted EBITDA rose by 7% and 9%, respectively.
On the downside, RevPAR in Greater China dropped by roughly 4%, impacted by macroeconomic pressures. The company also lowered its full-year gross fee guidance by $50 million to $100 million from earlier forecasts.
Mizuho, despite this robust performance, maintained a neutral rating on Marriott's stock due to concerns such as the slowdown in China, a deceleration in hotel leisure spending, and questions regarding the sustainability of Marriott's earnings algorithm.
InvestingPro Insights
As Marriott International (NASDAQ:MAR) navigates through a period of fluctuating RevPAR growth and mixed fee results, InvestingPro data and tips provide a deeper look into the company's financial health and market position.
Marriott's market capitalization stands at $63.99 billion, reflecting its significant presence in the hospitality industry. The company's impressive gross profit margin of 83.22% over the last twelve months as of Q2 2024 underscores its strong operational efficiency. Moreover, Marriott's management has demonstrated confidence in the company's future by aggressively buying back shares.
InvestingPro Tips highlight that despite the recent downturn in Marriott's stock price, analysts predict the company will remain profitable this year. This is supported by a historical high return over the last decade, indicating a track record of resilience and growth.
However, investors should note that the stock is currently trading at a high P/E ratio of 23.85 relative to near-term earnings growth, suggesting a premium valuation. For those seeking a more comprehensive analysis, there are additional InvestingPro Tips available at https://www.investing.com/pro/MAR, which could further inform investment decisions regarding Marriott International.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.