Marriott International Posts Solid Q4: Too Late for Investors to Check In?

| About: Marriott International, (MAR)
This article is now exclusive for PRO subscribers.

Marriott International (NYSE:MAR) posted fourth quarter earnings on Monday. The company reported adjusted diluted earnings of $0.39. This was a 22% increase year over year. Worldwide revenue per available room (REVPAR) rose 8.1% in constant currency and average daily rates rose 2.3% in the fourth quarter. Adjusted net income rose 27% to $150 million. These earnings were adjusted to include a $100 million non-cash impairment and other charges, including $84 million for a new revenue management software system. The company says that the software system will give it a significant competitive advantage.

Clearly the economic recovery is taking hold for Marriott. Chairman and CEO, J.W. Marriott, Jr., said,

We clearly turned the corner as 2010 progressed and our company delivered outstanding results for the year.

For the full year Marriott earned an adjusted diluted $1.15 per share. Adjusted net income totaled $435 million, a 27% increase over 2009. Worldwide comparable REVPAR increased 5.8% for the year. Revenues totaled $11.7 billion in 2010 compared to $10.9 billion in 2009.

For 2011, Marriott expects strong pricing power. The company predicts that REVPAR will grow 6%-8% worldwide. Marriott plans to add an additional 35,000 rooms in 2011.

Marriott also announced that it will spin off its timeshare business into a separate, publicly traded company. Marriott expects to complete the spin off through a special tax-free dividend in late 2011. The timeshare business was badly hurt in the recession of 2008 - 2009. Mr. Marriott said, "The transaction will permit both companies to tailor their business strategies to best address market opportunities in their respective industries". The timeshare segment reported revenue of $1.5 billion in 2010. After the spin off the Marriott family will own approximately 21% of each company.

Shares of Marriott closed Monday's session at $41.00. The 52 week high is $42.68, hit in December. The stock has come a long way over the past twelve months, climbing 51%. Here is an in-depth look at the stock.

Metric MAR
Market Cap $14.9 B
Recent Price $41.00
Forward PE 36.7
Dividend Yield 0.85%
5 Year Div. Growth Rate -11.90%
Price/Book 11.07
Price/Cash Flow* 14.77
Price/Earnings Growth 2.89
Debt/Equity* 2.01
Revenue TTM* 11.43 B
Operating Cash Flow TTM 2.46 B
Capex TTM 383 M
Capex/Cash Flow FYE 0.16
5 Year Rev. Growth Rate 1.60%
Net Profit Margin -3.16%
Current Assets* 3.06 B
Revenue to Assets* 1.3
Long-term Debt 2.6 B

Data provided by Charles Schwab & Co.

*Data provided by I-Metrix

Shares of Marriott trade at a lofty 36.7 times forward earnings. By comparison, Starwood Hotels (HOT) trades at 39.2 times forward earnings and Intercontinental Hotel Group (NYSE:IHG) trades at 24.2 times forward earnings. Marriott has struggled with revenue growth and net profit margins, primarily due to the recession. These metrics should improve as the economy continues to recover.

In all, Marriott reported solid earnings for 2010. In addition, it pleased the street by announcing the spin off of the timeshare business. Most analysts feel that this business has been a drag on earnings for quite some time. I see the economy continuing to recover and Marriott gaining even more pricing power in 2011. With that said, I cannot get behind the stock at these levels. The stock has come too far already to justify the risks. In my opinion, investors who are not already in the stock have missed the check-in time.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.