Marriott (MAR)

Global hospitality company Marriott (NASDAQ:MAR) reported Q1 CY2025 results topping the market’s revenue expectations, with sales up 4.8% year on year to $6.26 billion. Its non-GAAP profit of $2.32 per share was 3% above analysts’ consensus estimates.

Company Overview

Founded by J. Willard Marriott in 1927, Marriott International (NASDAQ:MAR) is a global hospitality company with a portfolio of over 7,000 properties and 30 brands, spanning 130+ countries and territories.

Airlines, hotels, resorts, and cruise line companies often sell experiences rather than tangible products, and in the last decade-plus, consumers have slowly shifted from buying "things" (wasteful) to buying "experiences" (memorable). In addition, the internet has introduced new ways of approaching leisure and lodging such as booking homes and longer-term accommodations. Traditional airlines, hotel, resorts, and cruise line companies must innovate to stay relevant in a market rife with innovation.

Marriott International's primary competitors include Hilton Worldwide (NYSE:HLT), InterContinental Hotels Group (NYSE:IHG), Hyatt Hotels (NYSE:H), Wyndham Hotels & Resorts (NYSE:WH), and Accor (EPA:AC).

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Regrettably, Marriott’s sales grew at a sluggish 4.2% compounded annual growth rate over the last five years. This was below our standard for the consumer discretionary sector and is a poor baseline for our analysis.

We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new property or trend. Marriott’s annualized revenue growth of 7% over the last two years is above its five-year trend, but we were still disappointed by the results.

We can dig further into the company’s revenue dynamics by analyzing its revenue per available room, which clocked in at $181.75 this quarter and is a key metric accounting for daily rates and occupancy levels. Over the last two years, Marriott’s revenue per room averaged 11% year-on-year growth. Because this number is better than its revenue growth, we can see its room bookings outperformed its sales from other areas like restaurants, bars, and amenities.

This quarter, Marriott reported modest year-on-year revenue growth of 4.8% but beat Wall Street’s estimates by 0.6%.

Looking ahead, sell-side analysts expect revenue to grow 4.7% over the next 12 months, a slight deceleration versus the last two years. This projection doesn't excite us and implies its products and services will face some demand challenges.

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Marriott’s operating margin might fluctuated slightly over the last 12 months but has generally stayed the same, averaging 15.4% over the last two years. This profitability was solid for a consumer discretionary business and shows it’s an efficient company that manages its expenses well.

In Q1, Marriott generated an operating profit margin of 15.1%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Marriott’s EPS grew at a solid 13.4% compounded annual growth rate over the last five years, higher than its 4.2% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

In Q1, Marriott reported EPS at $2.32, up from $2.13 in the same quarter last year. This print beat analysts’ estimates by 3%. Over the next 12 months, Wall Street expects Marriott’s full-year EPS of $9.53 to grow 8.1%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Marriott has shown mediocre cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 9.1%, subpar for a consumer discretionary business.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Although Marriott hasn’t been the highest-quality company lately because of its poor top-line performance, it found a few growth initiatives in the past that worked out wonderfully. Its five-year average ROIC was 24.5%, splendid for a consumer discretionary business.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Fortunately, Marriott’s ROIC has increased significantly over the last few years. This is a good sign, and if its returns keep rising, there’s a chance it could evolve into an investable business.

Marriott reported $500 million of cash and $15.1 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $5.06 billion of EBITDA over the last 12 months, we view Marriott’s 2.9× net-debt-to-EBITDA ratio as safe. We also see its $685 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was encouraging to see Marriott beat analysts’ EBITDA and EPS expectations this quarter. On the other hand, its EBITDA guidance for next quarter missed. Zooming out, we think this was a decent quarter featuring some areas of strength but also some blemishes. The stock remained flat at $247.27 immediately following the results.

Updated: July 10, 2025 at 11:00 PM EDT

Before investing in or passing on Marriott, we urge you to understand the company’s business quality (or lack thereof), valuation, and the latest quarterly results - in that order.

Marriott isn’t a terrible business, but it doesn’t pass our quality test. Although its revenue growth was exceptional over the last five years, it’s expected to deteriorate over the next 12 months and its revenue per room has disappointed. And while the company’s stellar ROIC suggests it has been a well-run company historically, the downside is its projected EPS for the next year is lacking.

Marriott’s P/E ratio based on the next 12 months is 27.4x. This valuation tells us a lot of optimism is priced in - we think there are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $275.40 on the company (compared to the current share price of $282.30), implying they don’t see much short-term potential in Marriott.