Marriott Internationai Inc. (MAR) is looking to continue a strong rebound from a rough October as it reports third-quarter earnings on Monday.
The rebound in Marriott bridging into November has brought shares of the Maryland-based hotel chain up to $120.93 as of Friday's close after market turmoil in October pushed the stock to its lowest close in over a year, at just over $107 per share on Oct. 24.
Marriott still looks discounted to some analysts.
"Marriott continues to be our top pick in the hotels space, with the company benefiting from strong earnings momentum, structural growth opportunities and significant shareholder returns," Berenberg analyst Stuart Gordon wrote in a preview of earnings. "With our outlook not as cautious as the market, we remain of the view that the shares are attractive at current levels, both in terms of the fundamentals and the current valuation."
Gordon set a "Buy" rating and a price target of $163 per share ahead of Monday's presentation.
The consensus analysts outlook for the release this evening calls for earnings per share of $1.31 and revenue of $5.37 billion. The EPS estimate represents a 20% jump year over year from $1.10 in last year's third quarter, while the revenue expectation comes in lower than the prior-year figure of $5.66 billion.
It is worth noting that the hotel chain handily beat earnings per share estimates by $0.35 while missing revenue estimates by almost $500 million in the second quarter. Bullish investors and analysts will hope that the tempered revenue estimates this quarter will be an easier bar to clear.
Marriott shares were up slightly in pre-market hours on Monday.
Possibly clouding the earnings release are trade and geopolitical issues that impact the international chain.
Marriott maintains hundreds of hotels in China, for example, and its growth in the nation is often cited as a key performance driver.
Threats from the Chinese government against Marriott specifically will certainly be a topic of discussion.
"Beijing compelled Delta Airlines to publicly apologize for not calling Taiwan a "province of China" on its website. And it pressured Marriott to fire a U.S. employee who merely liked a tweet about Tibet," adds @VP.— Steve Herman (@W7VOA) October 4, 2018
CEO Arne Sorenson touched on the subject briefly in the company's second-quarter earnings call, picking up on budding anxiety.
"We're all listening to the trade talk, I think, and it is anxiety-producing in many respects," Sorenson admitted in August.
The CEO worked to assuage investor concern on the topic, highlighting domestic ownership as an insulator.
"There's no sign that the trade conversation is impacting performance," he said. "Remember, our business is substantially Chinese in that of the hotels we have opened in China, I can think of one that's not owned by a Chinese company."
Sorenson will need to provide proof that Sino-American strife is not cutting into the business.
The bar is set somewhat high as one of Marriott's primary competitors, in InterContinental Hotels Group (IHG) reported exceptionally strong demand in the region in its own October earnings.
Given the uncertainty of Middle Eastern politics, especially following the killing of Saudi journalist Jamal Khashoggi, the company's interest in the United Arab Emirates and North Africa becomes a political risk as well.
The earnings release detailing results will be available at 5:00 p.m. ET, which will be followed by an earnings call on Tuesday morning at 10:00 a.m. ET.