Growth & Income: Marriott International (MAR)

Marriott International (MAR) will continue to benefit from improving conditions in the hotel industry. In the US, the hotel industry is experiencing higher occupancy levels, higher average daily room rates, and higher revenue per available room. Meanwhile, the international hotel market is even stronger than in the US.

Growth and Income

The company is expected to grow its earnings per share 8.5% in 2010, 26.5% in 2011, and 13.0% over the next three to five years. The stock also offers investors a dividend yield of 0.5%.

This Zacks #2 Rank stock trades at 27.9x 2010 consensus EPS estimates and 22.0x 2011 consensus EPS estimates.

Business

Marriott International is a hospitality company that operates and franchises hotels and related lodging facilities worldwide.

First-Quarter Results

On April 22, Marriott announced Q1 total revenue of $2.63 billion, up from $2.495 billion in the year-ago quarter. The company earned $0.22 per share, beating the Zacks Consensus Estimate by 2 cents, or 10.0%. In the last five quarters, Marriott has beaten the Zacks Consensus Estimate by an average of 25.9%.

J. W. Marriott, Jr., chairman and CEO said, “In the first quarter we welcomed increasing numbers of business guests to our hotels as travelers got back to work in most markets around the world. Corporate room nights for the Marriott Hotels & Resort brand in North America rose 16 percent in the first quarter as business demand strengthened dramatically. At the same time, leisure demand remained solid as vacationers continued to find memorable holiday experiences and good values. While first quarter room rates were generally lower than last year, as occupancy levels continue to improve, we see higher room rates on the horizon.”

Guidance

For the second quarter, Marriott expects earnings per share of $0.25-$0.29. For full-year 2010, the company expects EPS of $0.95-$1.05.

Estimates

After the company’s better-than-expected Q1 results, the Zacks Consensus Estimate for 2010 rose 9 cents, or 9.5%, to $1.04 and the Zacks Consensus Estimate for 2011 increased 14 cents, or 22.0%, $1.32.

Balance Sheet

At the end of the first quarter 2010, total debt was $3.3 billion with a cash balance of $118 million, compared to $2.3 billion in debt and $115 million in cash at the end of 2009. The increase in debt included $1 billion of debt associated with securitized Timeshare mortgage notes now required to be consolidated, as noted below. At the end of the first quarter 2010, Marriott had borrowings of $396 million outstanding under its $2.4 billion bank revolver.

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