Lodging Stocks Could Rally After a Trade Deal

Marriott International, Inc. (MAR) stock is trading lower by around 2% in Tuesday's pre-market after the hotel group missed third quarter profit estimates while beating on revenues that rose 4.6% year over year. The release also guided fourth quarter revenues and earnings per share (EPS) below consensus, contributing to the modest sell-the-news reaction. International growth outperformed domestic operations, with a 1.9% increase compared to 1.3% in the United States and Canada.

The results mark the second mixed quarter in a row for the lodging giant, which topped out in the first quarter of 2018 after a multi-year uptrend. Trade tensions and overseas economic weakness have contributed to the uninspiring metrics, keeping investors on the sidelines. In addition, Wall Street analysts have initiated few ratings changes since the August report, with several Hold ratings and a September upgrade from RBC Capital Markets.

Optimism about a trade deal could underpin Marriott and rival Hilton Worldwide Holdings Inc. (HLT) in the coming weeks because a settlement with China would reinvigorate the world economy, promoting greater business travel between nations. The two brands are top choices for American business when travelling overseas, but they need calmer waters and a less stressful trade environment to encourage greater investment.

MAR Long-Term Chart (2008 – 2019)

Chart showing the share price performance of Marriott International, Inc. (MAR)

Marriott International stock hit a 10-year low in the lower teens after the 2008 economic collapse and turned higher into the new decade, stalling in the mid-$30s in 2011. That level marked resistance into a 2013 breakout that attracted broad-based buying interest, lifting the stock into the mid-$80s just two years later. An intermediate correction got bought after the 2016 presidential election, generating a rapid ascent into January 2018's all-time high at $149.21.

The stock sold off for the rest of 2018, finally coming to rest at $100 in late December. The 2019 bounce reversed at the .786 Fibonacci sell-off retracement level in July, giving way to a steady pullback that found support below $120 in October. The bounce since that time has cleared 50- and 200-day exponential moving average (EMA) resistance between $125 and $127, highlighting the most important price zone to watch in Tuesday's session.

The monthly stochastics oscillator crossed into a buy cycle just above the oversold zone this week, but more buying power is needed to confirm a bull cycle. That could be tough to accomplish given third quarter results, but market players may wish to look forward to a more supportive environment. Even so, accumulation readings have slumped badly so far in 2019, indicating that it will take months of buying pressure to lift Marriott stock back to last year's high.

HLT Long-Term Chart (2013 – 2019)

Chart showing the share price performance of Hilton Worldwide Holdings Inc. (HLT)

Hilton Worldwide came public in its current form in December 2013, opening in the low-$40s and testing support at that trading floor multiple times into October. The stock turned sharply higher into the summer of 2015, topped out in the mid-$60s, and plunged through IPO support in December. It posted an all-time low at $33.16 a month later, marking a major buying opportunity, ahead of a recovery wave that reached the prior high in May 2017.  

A September 2017 breakout got bought aggressively, lifting the stock into the upper $80s in January 2018. It ticked lower through the rest of the year, finding support in the mid-$60s in December, and bounced strongly into 2019. This year's uptick completed a breakout above 2018 resistance in April and posted an all-time high at $101.14 in July, yielding a reversal that has been testing breakout support for the past four months,

The monthly stochastics oscillator crossed into a bull cycle in the upper half of the indicator panel this week but needs greater buying power to confirm the reversal. It is trading less than four points under the 2019 high, but accumulation-distribution readings have barely budged since April, raising doubts that the stock can attract the committed buyers needed to power a sustained uptrend into the triple digits.

The Bottom Line

Marriott reported mixed third quarter results on Monday evening, and the stock is set to open Tuesday's session two to three points lower. Meanwhile, rival Hilton has carved a more bullish long-term price pattern, suggesting that it will offer stronger returns in coming months.

Disclosure: The author held no positions in the aforementioned securities at the time of publication.

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