Calls of Note Part 4

- Citigroup reiterates their Buy rating on Marriott International (NYSE:MAR) shares and are increasing their price target to $55 from $48, or 24x '08 EPS. This is below MAR's '07 multiple of 25x, but above its historical average of 21x. Cyclical growth, new unit expansion and aggressive share repurchases are driving strong EPS momentum (+20%/yr for '06- '09), ROIC improvement and valuation expansion versus history. By 2009, Marriott's hotel system should be 16% larger, its average share count 18% lower and ROIC should be in the mid-to-high 20's vs. 20% in 2006.

MAR is an attractive mid-cycle lodging play, as unit growth, share repurchases and timeshare should offset gradual REVPAR deceleration. As such, MAR could sustain faster 3-year earnings growth than its real estate intensive peers (+20% vs. +16% at REITs).

During a comparable period of the last lodging cycle ('95-'97), as the industry transitioned from "early recovery" to "mid-cycle growth", MAR out-performed the S&P 500 over 3-years. MAR shares are up 21% since early October, when Marriott's strong 3Q earnings report alleviated what had been a concern among some investors that lodging fundamentals were weakening. Underlying demand trends remain strong and the '07 outlook is positive.

Notablecalls: Just a chart play. I have no view on the fundamentals. Tight leash.