After trading at $18 at the beginning of the month and slipping to $12.375 Friday, shares of Marriott Corp. were battered again yesterday on the New York Stock Exchange, falling to $10.875.
Analysts cite several factors in the slide: market worries about the value of Marriott's real estate holdings; fears of how healthy the lodging industry will be in the face of recession and higher oil prices; and the Chapter 11 bankruptcy filing
last Tuesday of another lodging company, Prime Motor Inns Inc.
"Obviously, investors have questions about the nature of the real estate industry and what Marriott's real estate empire is actually worth," said R. Bentley Offutt of Offutt Securities Inc., the Baltimore institutional research and brokerage firm.
Caroline S. Levy, a Shearson Lehman Brothers analyst, repeated her "sell" recommendation for Marriott and suspended earnings estimates yesterday, saying the company may have to take write-downs against upto $3 billion of its assets.
Dow Jones News Service reported yesterday that, in a note to clients yesterday, Ms. Levy cited $1.2 billion of property held for sale "where the cost is probably more than current market value" and $500 million of investments in affiliates, "many of which are losing money."
She cited $400 million in notes receivable and said much of that amount "is really a junk bond" related to the sale last year of Marriott's airline catering operation. She also cited $500 million of intangible as sets and $400 million of other assets.
"Based on the Prime Motor Inns debacle and the recent rapid deterioration in the real estate market, credit markets and banking environment, we believe it is quite likely that [Marriott] will have to take sizable write-downs against some" of those assets, Ms. Levy wrote to clients.
Spokesmen for Marriott -- a lodging, food-service and senior-care company -- could not be reached for comment yesterday.
Despite Ms. Levy's gloomy outlook for Marriott, Steven A. Rockwell, who follows the company for Alex. Brown & Sons in Baltimore, said he continues a "buy" recommendation.
"To me, the principal issue is the company's cash flow and its ability to generate cash flow going forward," Mr. Rockwell said. "I believe the company's cash flow will be relatively stable, even in a recession. Historically, Marriott's earnings and cash flow have increased during recession."
"Buying a company positioned with the excellent brand recognition that Marriott has will in the long run be considered a bargain," he said.
Gerald Petitt, president of Choice Hotels International, a Silver Spring-based hotel franchise chain, said there are differences between Prime Motor Inns and Marriott that make it hard to compare them.
"Linking Marriott to Prime's situation is substantially wide of the mark. I would never compare Prime and Marriott in the same breath," Mr. Petitt said. He said Marriott has "much deeper management" than Prime.
John J. Rohs, an analyst at Wertheim Schroder & Co., said selling in Marriott Corp. stock "reflects caution about the company's fundamentals and real estate market," as well as "a heavy dose of emotion."
Uncertainty over the Persian Gulf crisis, Mr. Rohs said, "has left investors nervous about the outlook for companies which are heavily tied to the economy, travel or discretionary spending." Marriott fits all three of these criteria, the analyst said.
He noted that figures published last week showed Marriott with 9.3 million shares, or nearly 10 percent of its shares outstanding, sold short,to be the third-most-shorted stock on the New York Stock Exchange, .
Mr. Rohs said last week's Chapter 11 bankruptcy filing by Prime Motor Inns illustrates that the industry faces "one of the worst hotel real-estate markets" in 20 years or more. He said Marriott has "a sizable real estate portfolio it would like to sell," but that "selling will continue to be very difficult." If Marriott sells property for less than carrying costs, he said, it will take some write-downs.
But Mr. Rohs said it is impossible to guess the magnitude of any write-downs, and he noted that the company "doesn't have to take any across-the-board write-downs."
Earnings trends at Marriott also remain poor, the analyst said, with third-quarter and full-year earnings expected to compare unfavorably with the figures from last year.