Hudson Securities Has Hold On Marriott International (MAR)

Hudson Securities has a Hold rating and a $44 price target on shares of Marriott International, Inc.

after it reported earnings. In a note to investors, Hudson writes, "MAR currently trades at 12.4x and 10.2x our 2011 and 2012 EBITDA estimates. While a bit high by historic standards, current multiples still reflect diminished cash flow levels relative to historic levels. After a deep downturn in 2009, we expect a strong recovery through 2012 when our adjusted EBITDA estimate actually surpasses MAR's 2008 peak. We think MAR will continue to trade at elevated levels for the next year or more as investors look through near-term earnings levels and focus on earnings potential beyond 2011 as the lodging recovery kicks into high gear and we enter a multi-year period of low supply growth and healthy RevPAR growth. That being said, we are reluctant to push multiples too far beyond historic norms just for the sake of maintaining positive ratings on stocks. We amended our valuation analysis to use a sum of the parts valuation for MAR in order to reflect the pending spinout of the timeshare stub. We now value the MAR lodging company using a 13.0x multiple on 2012 EBITDA. We apply this to MAR's 2012 EBITDA, net of estimated timeshare EBITDA. This 13.0x multiple we use is a point higher than the previous 12x multiple we used to value the whole of MAR. This compares to normalized valuation ranges for hotel management and franchise companies of 10x-14x. We are comfortable using an all-in multiple that is above the mid-point of the long-term range of average multiples. This reflects the fact that by 2012, MAR's fee stream will have surpassed its 2008 levels on the strength of recovering RevPAR, unit-level cash profits, and new units added to the system. This yields a per share value of $42 for MAR's lodging company." Shares of MAR are down 18 cents to $35.10 in pre-market trading.