Marriott International: A Mid-20s P/E And Easing Momentum, Downgrading To Hold

Core Viewpoint - Cheaper airfares and a solid labor market are driving demand for international hotels, benefiting Marriott International, which has seen nearly 40% stock appreciation since Q2 2023. However, the stock is now considered fully valued, leading to a downgrade from buy to hold ahead of upcoming earnings reports [2][4][16]. Financial Performance - In Q1 2024, Marriott reported non-GAAP EPS of $2.13, slightly below the consensus estimate of $2.16, while revenue reached $6.0 billion, a 6.4% increase year-over-year, which was a modest beat [4][5]. - The company’s adjusted EBITDA for Q1 was $1.14 billion, up from $1.1 billion the previous year, and it added 46,000 net rooms, largely due to a partnership with MGM Resorts International [5]. - Analysts expect Q2 operating EPS to be $2.48, an increase from $2.26 in the same period last year, with a projected stock price swing of 3.8% post-earnings [5][12]. Growth and Valuation - Comparable systemwide RevPAR growth was 4.2% globally, but only 1.5% in the US and Canada, with stronger growth in APAC (ex-China), EMEA, and CALA regions [4][6]. - The company raised its FY earnings guidance and plans to return over $4 billion to shareholders this year, increasing its expected capital return by $100 million [5][6]. - Current P/E ratios are in the 20s, indicating a less compelling valuation case despite a long-term average P/E close to 40 [7][8]. Market Position and Risks - Marriott's valuation metrics are weaker compared to peers, with a high-quality growth trajectory and impressive profitability trends, although free cash flow yield is not particularly high [10][11]. - Key risks include potential global economic slowdowns, increased labor costs, geopolitical threats, and supply chain disruptions affecting hotel development [6][10]. Technical Analysis - The stock has shown an uptrend since mid-2022, with recent price action indicating a slowdown in momentum. Support is seen in the $226 to $229 range, while resistance is noted between $255 and $260 [14][15][16].