February 7, 2017 Lodging (HLT, MAR) - MKM Partners derivative trading desk this morning is recommending buying April calls in these two lodging companies ahead of earnings on February 15: https://goo.gl/C4byi1 November 8, 2016 Marriott (MAR) - Down -3% in pre-market. Shouldn't be surprising considering our discussion about slowing RevPar growth hitting nearly all hotel stocks nationwide specially in Texas market. The only bright spot with better RevPar growth has been Las Vegas Strip. Highlights: - Q3 EPS $0.91 vs. $0.89 estimate, beat - Q3 Revenues $3.94B vs. $4.15B estimate, miss - Q3 Operating Profit $542M vs. $573M estimate, miss - Q3 RevPar flat 0.0% vs. +2.5% estimate, miss - Q3 Average Daily Rate down -1.6% vs. +0.3% estimate, miss - Q4 EPS Guidance $0.83 vs. $0.88 estimate, miss The biggest drag was international market where RevPar growth was down -3.2% and ADR was down 5.5%. Significant deterioration. November 1, 2016 Marriott (MAR) - Reports earnings on November 7. The good thing is Marriott / Starwood merger is now approved and moving forward with billions of synergies to be realized over time. A long term very bullish constructive view. However, I am cautious going into earnings in short term and think this could sell off. RevPar growth nationwide has decelerated from upper +3% to around +1.5% depending on which company's data and analyst outlook you it. Specifically in Houston market and other oil patches of the country. I think it is bigger risk to smaller operators such as LaQuinta (LQ), Hersha Hospitality (HT), Pebblebrook Hotel (PEB) than bigger rivals like Marriott. But speaks for broader weakness. All those charts were covered in webinar two weeks and all of them continue to roll over. Staying on sidelines until earnings are out of the way. September 20, 2016 Marriott (MAR) - Finally the good news here. Marriott and Starwood Hotels announced their merger transaction has received approval from the Chinese Ministry of Commerce (MOFCOM). This is the 3rd and final approval that they were waiting for. Now they have worldwide clearance and can move forward with merger closure. September 14, 2016 Marriott (MAR) - Another macro slowing trend emerging. Latest channel checks out today show deceleration in RevPar growth in past 3 weeks. Q3 RevPar is now tracking +2.9% YoY vs. +3.5% in Q2, though it is still within company outlook of +2% to +4%.
Small deceleration so its likely still okay but any further weakness and I expect forward earnings estimate cuts in hotel industry and bodes negatively for Q3 earnings releases.
August 19, 2016 Marriott (MAR) - Roll October 70 calls to October 75 strike. More upside ahead and momentum indicators RSI and MACD not overbought yet. Ultimately, the driver of stock outperformance is RevPar growth and Q2 earnings season showed us an acceleration from Q1 (if you remove the negative impact from forex). See chart below. Now with some stability in currency markets, logic says the chart below should show further improvement in Q3.
July 14, 2016 Marriott (MAR) - If you look under my notes in Activity Tracker, recall I showed a note from Nomura discussing strong channel checks. Today, BAML is also making that case. Earnings on July 27. "RevPAR improved sequentially for the first time in 8 quarters as we estimate 2Q RevPAR growth of +3.4% was up from 1Q’s +2.7%. Luxury/Upper Upscale RevPAR was up +2.7%." http://goo.gl/l8Oplv
June 14, 2016 Marriott (MAR) - European Union set to clear unconditionally Marriott, Starwood merger deal - Reuters http://goo.gl/HTlKVN June 3, 2016 Gaming & Lodging (MAR, WYNN, LVS, Others) - Yesterday we saw call buying in MAR and day before that we saw call buying in WYNN and LVS despite slightly weak revenue figures from Macau. Here is a note from Nomura today shedding light on how Q2 is shaping up after channel checks, the kind of fundamental research that I hunt for. See pic below.
June 2, 2016 Marriott (MAR) - Big buyer of 5,000 July 70 calls here for $0.70 offer side on bid/ask spread of 0.55 x 0.70. Approx $350,000 bullish bet on 1.3x daily average call volume with and implied volatility both rising to high of session. Potential double bottom last week and now coming up to technical downtrend resistance. Here is a balanced view from BAML issued on May 19 about lodging stocks. Analysts makes a fair point, says nearly all lodging stocks are guiding +3% to +5% RevPar growth but delivered only +2.1% to +2.6% growth in Q1, which makes it tough for them to meet guidance. http://goo.gl/Sx2SHD However, I challenge this two views: 1) Small signs of re-acceleration in macro growth metrics as we saw through out in last two weeks since this article was issued. Meeting average goal of +3.75% RevPar growth the rest of this year may still be difficult but wouldn't surprise me to see pick up sequentially quarter over quarter above +2.3%. 2) MAR is in the process of buying HOT with a lot of moving parts including major synergies to be expected which I believe are not fully modeled in consensus view. I have written extensively about this with proforma EPS projection for FY2017 targeting $4.51. Apply historic 20x multiple on that and you get $90 price target. See here:
http://goo.gl/2YjUyZ February 11, 2016 Marriott (MAR) - Announcing 25 million share buyback here intra-day January 29, 2016 Marriott (MAR) - Historically over last 5 year period it has never traded below 20x PE. Starwood (HOT) - Only briefly it traded below 15x PE back in 2011 after market crashed when S&P downgraded the US sovereign debt. Otherwise if you remove that outlier from the chart it has never traded below 16x PE. With that in mind and knowing both companies are merging to create the biggest hotel company in the world, see table below. The reason I bring this up is because Marriott is reporting earnings on February 17. Two days ago I mentioned traders sold to open 3,000+ March 60 puts on the bid for $2.30 to $2.35 credit. They collected about $600,000 put premium and remain in open interest. Today there are buyers of 2,000 February 62.5 calls for $1.25 to $1.45 as well as buyers of 800 March 60 calls for up to $2.95. These bulls are betting on stock breaking out through downtrend resistance. See chart below. Also, here is an excerpt from Susquehanna research from November 30 and the line that stands out for me: "Earnings will grow ~47% between now and pro forma 2017, a 21% CAGR. This assumes no incremental revenue synergies from cross-selling or lower OTA fees, and no asset sales or G&A savings beyond the initial $1.5bln to $2.0 bln and “at least $200 mln” targets. Over time, there could be additional upside. The upside could come from greater G&A synergies, which we view as highly likely, cross-selling opportunities – capturing more guests on more occasions – greater marketing scale and reach, and reduced OTA and commission fees." Full file: http://goo.gl/ECDWFa