On Tuesday, BMO Capital Markets updated its outlook on Marriott International (NASDAQ:MAR), increasing the hotel giant's price target from $255.00 to $265.00. The firm maintained its Market Perform rating on the stock.
Marriott's third-quarter earnings before interest, taxes, depreciation, and amortization (EBITDA) and earnings per share (EPS) fell short of expectations, primarily due to one-time expenses. The company's fourth-quarter guidance was also described as soft, with various factors contributing to the tempered outlook. Despite these challenges, the revenue per available room (RevPAR) environment is viewed as relatively stable, with group bookings performing well and leisure bookings falling behind. This trend is expected to continue into 2025.
BMO Capital Markets highlighted Marriott's recently announced cost-savings initiatives aimed at 2025. These measures are expected to balance lower fee growth projections and provide significant savings opportunities for property owners. The analyst suggests that these initiatives could positively impact lodging real estate investment trusts (REITs).
The analyst concluded that while Marriott's long-term growth prospects appear attractive, they are counterbalanced by mixed near-term trends. The firm's estimates for Marriott's performance have not significantly changed, and the current valuation of the company's stock is deemed fair.
InvestingPro Insights
Adding to BMO Capital Markets' analysis, InvestingPro data reveals that Marriott International's market capitalization stands at $72.19 billion, with a P/E ratio of 27.21. This valuation aligns with an InvestingPro Tip noting that Marriott is "Trading at a high P/E ratio relative to near-term earnings growth," which corroborates the analyst's view on the stock's current fair valuation.
Despite the softer Q4 guidance mentioned in the report, Marriott has demonstrated impressive financial performance. The company boasts a gross profit margin of 81.95% for the last twelve months as of Q3 2024, supporting another InvestingPro Tip highlighting "Impressive gross profit margins." This strong profitability metric underscores Marriott's operational efficiency, even in the face of recent challenges.
It's worth noting that Marriott's stock has shown a robust 21.67% price total return over the past three months, reflecting investor confidence in the company's prospects. This performance is consistent with the InvestingPro Tip indicating a "Strong return over the last three months."
For investors seeking a more comprehensive analysis, InvestingPro offers 13 additional tips for Marriott International, providing deeper insights into the company's financial health and market position.
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