On Tuesday, Baird, a financial services firm, updated its evaluation of Marriott International (NASDAQ: NASDAQ:MAR) shares, raising the hotel giant's price target from $258.00 to $264.00. The firm maintained a Neutral rating on the stock despite the price target increase.
The adjustment comes as Baird expresses an "incrementally positive view" on the shares of Marriott and the company's near-term fundamental outlook. The analyst cited several factors that contribute to this perspective, including steady revenue per available room (RevPAR) trends, which have been supported by a strong group pace.
Additionally, Baird anticipates that Marriott's organic net unit growth will see gradual improvements starting in 2025. The company's recently announced general and administrative (G&A) expense reductions are also expected to enhance earnings estimates, drawing attention from investors and industry observers.
The analyst's commentary focused on the implications of the cost cuts, questioning the timing and the extent of the benefits that franchisees might receive. There is also interest in how the organizational changes resulting from these cuts could potentially lead to better net unit growth for Marriott International in the future.
Marriott's strategic adjustments and financial outlook are being closely monitored by the market as the company navigates through its growth and cost management plans.
In other recent news, Marriott International has been the subject of an updated outlook by Goldman Sachs (NYSE:GS), which raised the hotel chain's price target from $267.00 to $280.00. This adjustment was made despite Marriott's downgrade of its fourth-quarter forecast due to slower net fee growth and lower owned and leased profits.
However, the company's long-term prospects, such as its optimistic view of net unit growth and revenue per available room for 2025, were highlighted.
A significant component of the revised price target is Marriott's new cost savings initiative, expected to generate $80-$90 million in savings in the next year. This program is anticipated to offset the expected slowdown in revenue per available room growth. Goldman Sachs has adjusted its 2025 EBITDA estimate for Marriott upwards to $5.34 billion from the previous estimate of $5.27 billion.
In other recent developments, Marriott reported its third-quarter 2024 results, showing growth in several areas despite regional challenges. The company noted a nearly 6% year-over-year increase in net rooms and a 3% rise in global revenue per available room, with group revenue per available room seeing a significant 10% surge.
Marriott also launched a new mid-scale brand, City Express by Marriott, and reported a record 219 million members in its loyalty program. Despite facing challenges in Greater China and flat leisure demand, Marriott has implemented cost-saving initiatives and anticipates restructuring charges in the fourth quarter.
InvestingPro Insights
Complementing Baird's positive outlook on Marriott International (NASDAQ: MAR), recent data from InvestingPro provides additional context to the company's financial performance and market position. Marriott's impressive gross profit margin of 81.95% for the last twelve months as of Q3 2024 underscores the company's operational efficiency, aligning with Baird's expectations of improved earnings estimates.
The company's revenue growth of 7.25% over the same period supports the analyst's observation of steady RevPAR trends. Moreover, Marriott's strong return over the last three months, with a price total return of 21.67%, reflects investor confidence in the company's strategic direction, including the anticipated G&A expense reductions.
InvestingPro Tips highlight that Marriott operates with a moderate level of debt, which could provide flexibility as the company aims for gradual improvements in organic net unit growth from 2025 onwards. Additionally, the stock is trading near its 52-week high, suggesting market optimism about Marriott's prospects.
For investors seeking a more comprehensive analysis, InvestingPro offers 15 additional tips for Marriott International, providing deeper insights into the company's financial health and market position.
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