Marriott Looks Overvalued Ahead of Monday Report

Marriott International Inc. (MAR) reports Q1 2021 earnings ahead of Monday’s opening bell, with analysts looking for a profit of just $0.04 per-share on $2.41 billion in revenue. If met, earnings-per-share (EPS) will mark less than one-tenth of the profit posted in the same quarter last year. The stock gained ground despite reporting a 59.6% Q4 2020 revenue decline in February but topped out a week later and has been rangebound since that time.

Empty Hotel Rooms

Rivals Hyatt Hotels Corp. (H) and Hilton Worldwide Holdings Inc. (HLT) missed Q1 estimates by wide margins last week, prompting selloffs throughout the lodging sector. Both companies posted revenue declines in excess of 50%, raising doubts about the much-heralded ‘return to normalcy’ following broad-based US vaccination efforts. The dismal results add to growing pessimism that Marriott will need to overcome this week to attract buying interest.

Marriott and rivals are dependent on international business travel, which will recover at a slower pace than recreational travel due to sluggish vaccine uptake in Europe and parts of Asia. In addition, the virtual meeting space is here to stay, likely to dampen revenues long after the pandemic runs its course. Sector stocks look highly overvalued given those bearish catalysts, trading near all-time highs thanks to the ultra-hot US equity markets.

Wall Street and Technical Outlook

Wall Street consensus now stands at a ‘Moderate Buy’, based upon 3 ‘Buy’ and 8 ‘Hold’ recommendations. No analysts are recommending that shareholders close positions and move to the sidelines. Price targets currently range from a low of $116 to a Street-high $168 while the stock closed Friday’s session about $8 above the median $138 target.  Upside appears limited due to this elevated placement, at least until warm bodies fill hotel rooms at a greater pace.

Marriott broke out above 2018 resistance at 149 in December 2019 and failed the breakout during 2020’s pandemic decline. A multiwave uptick reached the prior high in February 2021, yielding a breakout that also failed. Price action since that time has carved a descending triangle with horizontal support near 139 while accumulation has eased into a neutral holding pattern. Bears hold a modest edge in this set-up but earnings is likely to generate more smoke than fire.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

U.S. Hotel Operator Hilton’s Shares Slump as Q1 Earnings Disappoint

Hilton Worldwide Holdings, one of the largest and fastest-growing hospitality companies in the world, reported lower-than-expected earnings in the first quarter of 2021 as a resurgence in COVID-19 cases and tightening travel restrictions hurt bookings, sending its shares down about 4% on Wednesday.

The company, which has more than 4,000 hotels, resorts and timeshare properties comprising more than 650,000 rooms in 90 countries and territories, reported earnings per share, on an adjusted basis, of $0.02, missing the Wall Street’s consensus estimates of $0.05 per share.

Hilton said its net loss was $109 million for the first quarter and adjusted EBITDA was $198 million for the first quarter. System-wide comparable RevPAR fell 38.4% on a currency-neutral basis for the first quarter from the same period in 2020.

Following the disappointing results, Hilton shares fell about 4% to $124.54 on Wednesday. The stock rose over 12% so far this year.

Hilton Stock Price Forecast

Eight analysts who offered stock ratings for Hilton in the last three months forecast the average price in 12 months of $120.75 with a high forecast of $145.00 and a low forecast of $104.00.

The average price target represents a -3.18% decrease from the last price of $124.71. Of those eight analysts, three rated “Buy”, five rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $101 with a high of $141 under a bull scenario and $56 under the worst-case scenario. The firm gave an “Equal-weight” rating on the hospitality company’s stock.

Several other analysts have also updated their stock outlook. Hilton Worldwide had its price objective hoisted by Truist Securities to $114 from $106. Truist Securities currently has a hold rating on the stock. Raymond James raised their target price to $125 from $105 and gave the stock an outperform rating. Gordon Haskett upped their price target to $114 from $97 and gave the company a hold rating.

Analyst Comments

“The spread of coronavirus will pressure RevPAR growth, unit growth, and non-room fee growth. Strong mgmt team with a track record of creating value for owners. We see a wide risk-reward that will depend on the severity and speed of recovery from COVID-19,” noted Thomas Allen, equity analyst at Morgan Stanley.

“We think HLT is well placed from a liquidity standpoint, but its ability to repurchase stock medium-term may be impaired.”

Check out FX Empire’s earnings calendar

Will Earnings Season Bring Volatility To The Stock Market?

The Commerce Department last week reported that the U.S. economy grew at a +6.4% annual rate in the first quarter, slightly below estimates but still strong. If it would have come in real hot and much higher bears would have pointed to fanning the inflation flames even further.

This mindset of “bad-news-could-be-good-news” is helping to keep the stock market at or near all-time highs. If economic data somewhat disappoints it means the Fed stay dovish and accommodative for longer.

Fundamental analysis

That might be important to keep in mind as April data starting this week is expected to be extremely good. The April Employment Report is due next Friday and with upper-end of Wall Street estimates look for upwards of +1 million new jobs being added. Other key April data next week includes the ISM Manufacturing Index on Monday, and the ISM Non-Manufacturing Index on Wednesday.

employment

If the data comes in better than expected the bears will win the nearby battle and have the upper hand when talking higher inflation and the Fed perhaps tightening sooner than anticipated. So this week could be a bit tricky whereas “disappointing-data” could actually be digested as a win for the bulls and “strong data” a win for the bears.

The earnings calendar is packed again next week with big names including Activision Blizzard, Adidas, AllState, Cerner, Cigna, CVS, Dominion Energy, Enbridge, Etsy, Hilton Worldwide, Moderna, Monster Beverage, Nintendo, PayPal, Peloton, Pfizer, Rocket Companies, Square, TMobile, Wayfair, and Zoetis.

COVID-19

Checking in on U.S. progress against Covid-19, the number of adults that have received at least one dose is around 60%-65%, depending on the source. Global cases continue to rise led by India, where new infections have been hitting new record highs every day for weeks now. The country reported a staggering 380k new infections and 3,645 new deaths on Thursday while less than 10% of the population has been vaccinated.

Bottom line, the global restart will not be synchronized like many bulls had hoped would be the case and global growth may continue to struggle. At the moment the U.S. market doesn’t seem to care. It will be interesting to see if increasing inflation and continued global headwinds will eventually come home to roost.

SP500 technical analysis

SP500 earnings season

Earnings season can bring volatility to the stock market. At the beginning of May, cycles turn to the downside. Note, this is only a timing tool and it never shows the amplitude or strength of the move. When cycles are topping, it means we can expect a move down or choppy trading. This is it.

But relying on cycles only is not a good idea. Insider Accumulation Index shows bearish divergence on a daily chart. At the same time, Advanced Decline Line is still strong. The key resistance is around 4250 at the moment. I believe earning season can bring a profit booking to the stock market. If that happens, watch 4000 – 39500. It was a massive resistance and now it might turn into support. Intermarket Forecast is neutral. But if it turns to the downside, we will finally see a pullback in SP500.

For a look at all of today’s economic events, check out our economic calendar.

U.S. Hotel Operator Hilton Posts Surprise Q4 Loss, Shares Fall

Hilton Worldwide Holdings, one of the largest and fastest-growing hospitality companies in the world, reported a loss for the third consecutive time during the December quarter as a fresh spike in COVID-19 cases and tightening travel restrictions hurt bookings, sending its shares down over 2% in pre-market trading on Wednesday.

The company, which has more than 4,000 hotels, resorts and timeshare properties comprising more than 650,000 rooms in 90 countries and territories, reported a net loss of $225 million for the fourth quarter and $720 million for the full year. Adjusted EBITDA was $204 million for the fourth quarter and $842 million for the full year.

Hilton said its system-wide comparable RevPAR slumped 59.2% and 56.7% on a currency-neutral basis for the fourth quarter and full year, respectively, from the same periods a year ago.

The hotel company said its revenue slumped more than 60% to $890 million, well below the Wall Street consensus estimates of $1.03 billion.  Adjusted for special items, the company reported earnings per share of -$0.10 per share, well below the market expectations for a profit of $0.03 per share.

“We expect shares to react modestly lower on the lower than expected results, ahead of management’s commentary on the call later this morning. Within the results, we focus on the commentary for the continued generation of mid-single-digit system growth in 2021, which is a primary driver of long-term earnings and margin expansion as well as the valuation,” said David Katz, equity analyst at Jefferies.

“Our confidence remains high in recovery, the trajectory of which is still taking shape.”

Following this disappointing result, Hilton Worldwide Holdings‘ shares, which has risen over 2% so far this year, fell 2.3% to $111 in pre-market trading on Wednesday.

Hilton Stock Price Forecast

Six analysts who offered stock ratings for Hilton in the last three months forecast the average price in 12 months of $112.00 with a high forecast of $130.00 and a low forecast of $85.00.

The average price target represents a -1.42% decrease from the last price of $113.61. From those six analysts, three rated “Buy”, three rated “Hold”, none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $101 with a high of $141 under a bull scenario and $56 under the worst-case scenario. The firm gave an “Equal-weigh” rating on the hospitality company’s stock.

Several other analysts have also updated their stock outlook. BMO raised the target price to $110 from $92. UBS upped the target price to $124 from $114. Berenberg increased the target price to $100 from $77. Baird raises target price to $106 from $105. BMO Capital Markets raised their target price to $92 from $89 and gave the stock a “market perform” rating.

Moreover, Gordon Haskett raised their target price to $114 from $97 and gave the stock a “hold” rating. Wells Fargo & Company raised their target price to $105 from $95 and gave the stock an “equal weight” rating. Argus raised shares to a “buy” rating from a “hold” and set a $120 price target.

Analyst Comments

“The spread of coronavirus will pressure RevPAR growth, unit growth, and non-room fee growth. Strong management team with a track record of creating value for owners. We see a wide risk-reward that will depend on the severity and speed of recovery from COVID-19,” said Thomas Allen, equity analyst at Morgan Stanley.

“We think HLT is well placed from a liquidity standpoint, but its ability to repurchase stock medium- term may be impaired.”

Check out FX Empire’s earnings calendar