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Marriott Stock Price At Eight-Year High, Here’s Why

Marriott Stock Price At Eight-Year High, Here’s Why
By: Micheal Kaufman
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Marriott International Inc (MAR) stock soared on Thursday to its highest since the company’s 2-for-1 stock split in June 2006. One reason for the rise in share value is investors’ positive sentiments, which came about after Marriott announced at the end of last month that it expects its revenues to increase around 10% this year. The favorable outlook is due to positive developments in global travel environment, which will spur increased demand for hotel rooms.

Going forward, the Bethesda, Maryland-based company forecasts revenues will cross the $14 billion mark by the end of its 2014 fiscal year (FY14; ending December 31, 2014). The hotel expects a 4-6% growth in its topline from its existing hotels, and 4-5% from new hotels. Marriott’s revenues increased 8% last year to $12.78 billion. Air travel from developing economies had risen, which caused higher demand for the company’s hotels.

 

Consensus estimates project Marriott’s revenues will increase 7% to $13.67 billion. Sell side analysts expect the company’s adjusted earnings per share (EPS) will improve 23% to $2.47 during FY14. Last year, adjusted EPS rose 22% to $2.

Marriott stock price is currently 24.5 times its expected earnings for the year ahead, which is a premium of 23% to its average three-year forward price-to-earnings (P/E) multiple of 19.9x. Against the Dow Jones US Hotels Index’s forward multiple of 24.8x, Marriott is currently trading at a discount of 1.1%. The stock is also trading at a discount of 27.4% to Hilton Worldwide’s (HLT) forward P/E of 33.7x.

According to a survey conducted by Bloomberg, the diversified hospitality company gets coverage from 28 analysts across the Street. 15 analysts recommend buying the stock, and only three analysts rated it a Sell. The average of the 12-month price target given by the analysts is $62.04, 5.4% below last Thursday’s closing price of $65.56. In the past one year, Marriott’s stock price has increased nearly 58.4%.

JPMorgan & Chase (JPM) has given the stock a 12-month target price of $70, and Credit Suisse Group AG (ADR) (CS) has given the stock a price of $68.

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