Refer to the following excerpts from an analysts' report (13 pages total) covering Marriott International Inc....
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Refer to the following excerpts from an analysts' report (13 pages total) covering Marriott International Inc. to complete the following requirements. Morningstar Equity Analyst Report | Report as of 21 Sep 2019 05:47, UTC I Page 1 of 13 Marriott International Inc MAR (XNAS) Morningstar Rating Last Price 20 Sep 2019 21:44, UTC 126.97 USD 20 Sep 2019 Fair Value Estimate Price/Fair Value Trailing Dividend Yield % Forward Dividend Yield % Market Cap (B) Industry 129.00 USD 0.98 Lodging 1.40 20 Sep 2019 1.40 20 Sep 2019 41.82 20 Sep 2019 14 May 2019 15:42, UTC Fair Value & Profit Drivers After reviewing Marriott's second-quarter results, we have maintained our fair value estimate of $129 per share. Our fair value estimate implies a 2020 adjusted enterprise value/EBITDA of 15 times. The key drivers of our financial model are revenue per available room, managed and franchised room growth, and owned expenses. Our unit growth forecast averages 4.8% annually over the next decade, supported by a favorable position with next-generation travelers, new brand growth, and a strong pipeline. For the company, we model managed and franchised 2019-28 annual unit growth of 3.3% and 6.4%, respectively. Our revPAR annual growth forecast for the next 10 years is 3.6%, with a steady-state revPAR around 5%. We see this U.S. hotel cycle lasting through 2019, representing 10 years of positive revPAR growth (versus an average seven- to nine-year length). This view is due to U.S. (67% of Marriott's total rooms) industry supply growth potentially peaking at around 2% in 2018 (versus closer to 3% in past cycles), and due to global demand continuing to be bolstered by emerging-market regions that are experiencing more middle- income class growth. As a result, we estimate 6.8% average annual revenue growth for 2019-28. We project operating margins (unadjusted for cost reimbursement) reaching 16.2% in 2028 from 12.5% in 2018 and steady-state EBI growth of 3.5% in 2028. We continue to assume a 9% cost of equity, which is in line with the 9% rate of return we expect investors to demand of a diversified equity portfolio. Sub-Industry: Hotels, Resorts & Cruise Lines Peer Group": Hotel Companies-Larger Close Competitors InterContinental Hotels Group PLC IHG. Accor SA AC... Hyatt Hotels Corp H. Choice Hotels International Inc CHH Currency (Mil) Market cap TTM Sales Operating Margin TTM/PE 26.11 58.14 19.16 23.58 USD EUR USD USD 11,420 10,666 7,866 5,048 4,504 4,238 4,763 1,072 16.07 13.66 5.67 30.77 a. What method is this analyst using to value Marriott? b. What is this analyst's price target for Marriott? If Marriott achieves that target in the next twelve months, what would be an investor's return? Explain. c. Describe how this analyst justifies the price target. d. Is there any other information in these excerpts that you might use to value Marriott? Explain. Refer to the following excerpts from an analysts' report (13 pages total) covering Marriott International Inc. to complete the following requirements. Morningstar Equity Analyst Report | Report as of 21 Sep 2019 05:47, UTC I Page 1 of 13 Marriott International Inc MAR (XNAS) Morningstar Rating Last Price 20 Sep 2019 21:44, UTC 126.97 USD 20 Sep 2019 Fair Value Estimate Price/Fair Value Trailing Dividend Yield % Forward Dividend Yield % Market Cap (B) Industry 129.00 USD 0.98 Lodging 1.40 20 Sep 2019 1.40 20 Sep 2019 41.82 20 Sep 2019 14 May 2019 15:42, UTC Fair Value & Profit Drivers After reviewing Marriott's second-quarter results, we have maintained our fair value estimate of $129 per share. Our fair value estimate implies a 2020 adjusted enterprise value/EBITDA of 15 times. The key drivers of our financial model are revenue per available room, managed and franchised room growth, and owned expenses. Our unit growth forecast averages 4.8% annually over the next decade, supported by a favorable position with next-generation travelers, new brand growth, and a strong pipeline. For the company, we model managed and franchised 2019-28 annual unit growth of 3.3% and 6.4%, respectively. Our revPAR annual growth forecast for the next 10 years is 3.6%, with a steady-state revPAR around 5%. We see this U.S. hotel cycle lasting through 2019, representing 10 years of positive revPAR growth (versus an average seven- to nine-year length). This view is due to U.S. (67% of Marriott's total rooms) industry supply growth potentially peaking at around 2% in 2018 (versus closer to 3% in past cycles), and due to global demand continuing to be bolstered by emerging-market regions that are experiencing more middle- income class growth. As a result, we estimate 6.8% average annual revenue growth for 2019-28. We project operating margins (unadjusted for cost reimbursement) reaching 16.2% in 2028 from 12.5% in 2018 and steady-state EBI growth of 3.5% in 2028. We continue to assume a 9% cost of equity, which is in line with the 9% rate of return we expect investors to demand of a diversified equity portfolio. Sub-Industry: Hotels, Resorts & Cruise Lines Peer Group": Hotel Companies-Larger Close Competitors InterContinental Hotels Group PLC IHG. Accor SA AC... Hyatt Hotels Corp H. Choice Hotels International Inc CHH Currency (Mil) Market cap TTM Sales Operating Margin TTM/PE 26.11 58.14 19.16 23.58 USD EUR USD USD 11,420 10,666 7,866 5,048 4,504 4,238 4,763 1,072 16.07 13.66 5.67 30.77 a. What method is this analyst using to value Marriott? b. What is this analyst's price target for Marriott? If Marriott achieves that target in the next twelve months, what would be an investor's return? Explain. c. Describe how this analyst justifies the price target. d. Is there any other information in these excerpts that you might use to value Marriott? Explain.
Expert Answer:
Answer rating: 100% (QA)
a What method is this analyst using to value Marriott The analyst is using a discounted cash flow DCF model to value Marriott A DCF model estimates th... View the full answer
Related Book For
Statistical Techniques in Business and Economics
ISBN: 978-1259666360
17th edition
Authors: Douglas A. Lind, William G Marchal
Posted Date:
Students also viewed these accounting questions
-
Refer to the following financial statements for Crosby Corporation: CROSBY CORPORATION Income Statement For the Year Ended December 31, 20X2 $ 4,240,000 2,640,000 $1,600,000 700,000 300,000 $ 600,000...
-
Refer to the following article: Rubin, Richard; Saunders, Laura, "EXCHANGE --- Tax Report: Tax Shelter From the Storm --- Blockbuster transaction highlights a capital-gains tax advantage for...
-
The problems in this problem set refer to the following game matrices. In each case, Jack chooses left or right and Jill chooses up or down. The outcomes show how many buckets of water are rewarded....
-
Using Exhibit 12-1, determine the life expectancy of a 40-year old male.
-
An investor owns a call option on bond with a strike price of 100. The coupon rate on bond is 9% and has 10 years to maturity. The call option expires today at a time when bond is selling to yield...
-
Assume that a Pitot tube is inserted into the test-section flow of the wind tunnel in Prob. 3.4. The tunnel test section is completely sealed from the outside ambient pressure. Calculate the pressure...
-
Suppose you are starting a business, T-Shirts Plus, Inc., to imprint logos on T-shirts. In organizing the business and setting up its accounting records, you take your information to a CPA to prepare...
-
Goods Company is a major manufacturer of foodstuffs. The companys products are sold in grocery and convenience stores throughout the United States. Goods name is well known and respected because its...
-
A boxplot for a set of 76 scores is given below. T T T T 5 6 7 8 9 10 11 12 13 DATA How many scores are represented in the blue section of the boxplot? Answer: 19 Preview My Answers Submit Answers
-
On January 1, 2024, Palmer Company acquired a 90% interest in Stevens Company at a cost of $1,000,000. At the purchase date, Stevens Companys stockholders equity consisted of the following: An...
-
Currently, a lot of individuals and workers from different sectors and industries remain at home without options of Work-From-Home scheme, due to the ECQ/GCQ caused by the COVID-19 pandemic. Why cant...
-
It is desired to maintain the interior of a refrigerator whose base dimensions are 45 x 45 cm and the height is 1.2 m at 5 C. The walls of the refrigerator are made up of two sheets of steel, 0.318...
-
Brayden bought a car for $33,000 by making a downvpayment of $6,930 and weekly payments at the end of every week for 5 years. Interest is 1.48% compounded annually. 1. What are the weekly payments,...
-
How does structural functionalism view the evolution of social structures over time, and what factors are considered when assessing the adaptability and resilience of societal systems in the face of...
-
In May 2022, it was reported that Hockey Canadathe governing body for the sport of ice hockey in Canadahad paid a settlement to a woman who alleged that she was the victim of a sexual assault...
-
You have been invited to meet with the senior management team to convince them to set up a PMO. You hold a workshop to educate them about the types of PMOs , including the benefits and the risks of...
-
Determine 1 {F}. 5s2-12s+4 F(s)= s(S-3)(s-6) | {F}=
-
Explain the buyers position in a typical negotiation for a business. Explain the sellers position. What tips would you offer a buyer about to begin negotiating the purchase of a business?
-
Compute Paasches index for 2016 using 2000 as the base period. 2016 2000 Price Price $0.81 0.84 1.44 2.91 Item Quantity 18 5 70 27 Quantity 27 Margarine (pound) Shortening (pound) MIlk (V2 gallon)...
-
A study conducted several years ago reported that 21 percent of public accountants changed companies within 3 years. The American Institute of CPAs would like to update the study. They would like to...
-
Explain the difference between a sample and a population.
-
Why are accounting standards important to auditors?
-
What is the relevance of FREDs for auditors?
-
What is aSORP?
Study smarter with the SolutionInn App