My Five Star Hotel Pick

Today was a big day for the travel industry, as everyone from Avis Budget Group (CAR) to Garmin Ltd (GRMN) to Virgin America Inc. (VA) reported their latest quarterly results. Above all else, the hotel industry was at front and center, with earnings announcements from three of the biggest names in the business—Hilton Worldwide Holdings Inc. (HLT), Hyatt Hotels Corp. (H) and Marriott International Inc. (MAR).

With disposable income and consumer confidence on the rise in the United States, Americans are feeling more comfortable with travelling again. Industry analysts expect U.S. hotels will be able increase their rates by 5.7% each year from 2015 to 2017.

However, not all hotel chains are created equally. This earnings season has made that clear. For the fourth quarter, Hilton posted earnings of $0.16 per share, missing the $0.18 consensus EPS estimate by 11%. Meanwhile Hyatt missed on revenue, reporting $1.08 billion when analysts were looking for $1.14 billion in sales. Both companies saw their stock fall after their respective earnings announcements. It’s easy to see why I have Hyatt at a C-rating (Hold), and Hilton at a B-rating (Cautious Buy) in Portfolio Grader.

While both Hilton and Hyatt missed the mark for the fourth quarter, Marriott did not disappoint. For the fourth quarter, earnings increased 39% to a record $0.68. This beat the $0.65 consensus EPS estimate by nearly 5%.

Meanwhile, worldwide revenue per room (RevPAR) jumped 6%, while North American RevPAR advanced 8%. Total revenues were $3.6 billion, a 12.5% increase over Q4 2013. This also beat the $3.48 billion consensus sales estimate handily.

Looking ahead to Q1 2015, Marriott expects 5% to 7% worldwide RevPAR growth and between $0.68 and $0.72 EPS. This translates to between 19.3% and 26.3% annual earnings growth.

As I write this, MAR shares are rallying in after-market trading, and I expect them to open higher tomorrow morning. In Portfolio Grader, MAR earns an A-rating, indicating that it is a Strong Buy.

Sincerely,

Louis Navellier

Louis Navellier

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