If transportation stocks have been some of the strongest performers in this market (aside from the considerably more speculative biotechnology sector), then airlines and railroads have been the leaders.
While lodging stocks are excluded from the Dow Jones Transportation Average, they are related to business conditions within the transportation industry. Many of these companies are doing great on the stock market—and that could be a good sign for the broader market in 2015.
Marriott International Reporting Strong Numbers
The last time we looked at Marriott International, Inc. (MAR) was the middle of December last year when the position was in consolidation, trading in a tight range. (See “Good Business for Marriott Suggests Positive Economic Outlook for 2015?”) Now Marriott International has broken out to the upside on the stock market. The company, once again, has produced another solid quarter.
Wall Street earnings estimates for this business have mostly been ticking higher for upcoming periods. The stock has been doing very well over the last year and dividend payments have been going up.
Chart courtesy of www.StockCharts.com
The company experienced double-digit top-line growth in the fourth quarter of 2014, improving 11% comparatively to $3.56 billion. Net income rose a marked 30% over the fourth quarter of 2013 to $197 million, while net income per diluted share rose 40% comparatively.
According to the company, North American revenues per available room (RevPAR) grew 6.7% in the fourth quarter, while global RevPAR grew 6.2% comparatively in constant dollars.
For the year, Marriott International posted record earnings and unit growth, with 715,000 rooms available in 79 countries. This year, the company expects to reach one million rooms either open or under development. On top of that, RevPAR this year in the North American market is expected to grow between five and seven percent, consistent with its 2014 fourth-quarter results.
What Good Numbers in Travel-Related Stocks Means for Investors and the Broader Market
Strength in airlines, transportation stocks, and lodging companies is good news in an equity market that’s looking for direction. While the broader market is due for a major break at any given time and trading action since the beginning of the year has been tired, results from this group of stocks continue with their positive trend.
Marriott International, like other lodging stocks, is expensively priced in this market. I view the company as more of an important indicator, rather than an attractive stock to buy at this particular point in time.
I don’t expect a lot from the equity market this year, but the fundamentals for stocks generally remain positive with this low-interest-rate environment.
Last year, stocks had a choppy start to the year with most of the capital gains happening in the bottom half, including two major price reversals.
I don’t think this market will come apart without transportation stocks doing so commensurately. While current investor sentiment has been hit by the action in oil prices, those circumstances may just be a blessing in disguise for later this year.