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Starwood Beats but Guides Lower – Analyst Blog

Zacks Market Commentaries — Mon, 03 Aug 2009 18:33:36 +0000

Starwood Hotels and Resorts Worldwide, Inc.'s (HOT) second quarter earnings of $0.22 per share, were seven cents ahead of the Zacks Consensus Estimate, driven by the cost reduction initiatives implemented by the company. However, revenues were down in the quarter and the company’s guidance is below our consensus estimate.

EPS from continuing operations was $0.22, excluding special items, compared to $0.56 in the year-ago period. Income from continuing operations, excluding special items, was $41 million, versus $107 million in the prior-year period. Adjusted EBITDA was $200 million, versus $299 million the year-ago period.

The lower results stemmed from significant deterioration in revenue per available room (RevPAR). Worldwide system-wide same-store RevPAR was down 27.7% in the quarter compared to the year-ago period. System-wide same-store RevPAR in North America was down 25.4% year-over-year. Management and franchise revenues were down 18.0% year-over-year.

Margins were also restricted as a result of this revenue decline though the cost-cutting measures provided some relief. Worldwide comparable company-operated gross operating profit margins declined around 530 basis points. International gross operating profit margins for comparable company-operated properties decreased about 400 basis points, and North American comparable company-operated gross operating profit margins declined approximately 680 basis points.

Worldwide RevPAR for Starwood branded Same-Store Owned Hotels decreased 35.5% from the prior-year period. RevPAR for Starwood-branded same-store owned hotels in North America decreased 34.4% year-over-year.

We also expect Starwood to reduce its outstanding debt by year-end. At the end of the second quarter of 2009, the company’s total debt was $$3.752 billion, or net debt of $3.626 billion. Assuming the close of the sale of W San Francisco and the receipt of an IRS tax refund of over $200 million, the company estimated its gross debt will reduce to $3.2 billion and net debt to $3.0 billion by year-end 2009. The completion of sale of W San Francisco was already announced by the company last Thursday, July 30, 2009. The sale was made for $90 million.

Guides Low

The company expects RevPAR at same-store company operated hotels worldwide to be down 20% - 22% in the third quarter, while RevPAR at branded same-store owned hotels worldwide is expected to decline 24% - 26%. With these projections, management expects to post earnings of $0.06 - $0.10 per share in the third quarter.

For the full year, the company expects RevPAR at same-store company-operated hotels worldwide to decline 20%. RevPAR is expected to decline 25% at branded same-store owned hotels worldwide during 2009. Management expects to report earnings of approximately $0.65 per share for fiscal 2009 with these expectations.

Industry fundamentals have continued to deteriorate, with year-to-date weekly RevPAR down nearly 20% versus the year-ago period. The fact that declines in room rates comprise a larger portion of the weekly RevPAR declines throughout the industry is troubling, in our opinion.

We believe that the accelerating decline in average daily rate (ADR) will likely increase both the severity and length of the downturn in the lodging industry. Starwood’s rival company, Marriott International (MAR) also posted significant decline in RevPAR. Hence, we expect the shares of HOT and MAR to see more pressure in the coming months and continue with our Sell recommendations on both of these shares.
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Zacks Investment Research

Zacks Bull and Bear of the Day Highlights: IBM Corporation, Marriott International, Citigroup, Bank of America and Goldman Sachs – Press Releases

Zacks Market Commentaries — Mon, 20 Jul 2009 13:20:54 +0000

For Immediate Release

Chicago, IL – July 20, 2009 – Zacks Equity Research highlights IBM Corporation (IBM) as the Bull of the Day and Marriott International (MAR ) the Bear of the Day. In addition, Zacks Equity Research provides analysis on Citigroup (C), Bank of America (BAC) and Goldman Sachs (GS).

Full analysis of all these stocks is available at http://at.zacks.com/?id=2676.

Here is a synopsis of all five stocks:

Bull of the Day:

As a result of its large non-US revenue base, IBM Corporation (IBM) has been better insulated from the recent weakness in the U.S. economy than many of its peers. IBM reported strong 2Q09 results ahead of our and Wall Street expectations.

Profitability in the quarter was fueled by higher gross profit margins as IBM shifted to high-margin software and services business. The company also raised its EPS outlook for fiscal 2009 from $9.20 to $9.70. However, currency fluctuations are taking a toll on its revenue, which may be critical to earnings growth over the next two years.

Moreover, the company has focused on driving its bottom line through cost-cutting efforts. IBM is well positioned to benefit from the market recovery. We maintain our Buy rating on IBM shares and maintain our six-month price target of $120.00.

Bear of the Day:

We maintain our Sell rating on shares of Marriott International (MAR ) following the release of second quarter results. Although Q2 earnings results exceeded our expectation, we have lowered our full-year EPS estimate.

The operating environment in the lodging sector is expected to remain weak throughout 2009, with substantial RevPAR declines forecasted.

Given our forecast for negative earnings growth in 2009, along with the ongoing uncertainty regarding the state of the economy and its potential impact on Marriott's lodging and timeshare businesses, we rate the shares a Sell at this time.

Marriott RevPAR Plummets – Analyst Blog

Zacks Market Commentaries — Fri, 17 Jul 2009 14:16:45 +0000

On July 16, Bethesda, MD-based hotelier Marriott International (MAR) reported financial results for the second quarter of fiscal 2009. Total revenue was $2.6 billion, down 19.6% versus the prior year period.

Marriott experienced worldwide declines in revenue per available room (RevPAR) across all its brands. RevPAR is a key metric for the lodging industry.

Base management and franchise fees declined 19%, while incentive management fees were down 66% from the prior year. Owned, leased, corporate housing and other revenue decreased 54%, while adjusted timeshare sales and services revenue declined 24%.

Worldwide comparable company-operated properties RevPAR decreased 26.1% (23.0% on a constant-dollar basis), while worldwide system-wide RevPAR fell 23.6% (21.4% on a constant-dollar basis). International company-operated RevPAR fell 31.5% (22.1% on a constant-dollar basis) including a 22.3% decline in average daily rate (11.6% using a constant-dollar basis). The results reflected the economic recession in addition to H1N1 flu concerns, both of which significantly impacted markets outside North America.

Domestic results were weaker as North American company-operated RevPAR decreased 23.4%, with North American system-wide RevPAR down 21.2%. RevPAR at the company's comparable company-operated North American full-service and luxury hotels (including Marriott Hotels & Resorts, The Ritz-Carlton and Renaissance Hotels & Resorts) was down 23.5%, stemming from a 14.7% decline in average daily rate.

Adjusted EBITDA decreased 43% year-over-year. Net income from continuing operations in the quarter ended June 19 plunged to $37 million or $0.10 per share, from $153 million, or $0.41 per share a year earlier.

Adjusted earnings from continuing operations were $84 million or $0.23, down 55% year-over-year on a per share basis. The 2009 results exclude $0.08 per share in restructuring and other charges, and $0.05 per share in certain tax items.

Currently, Marriott has a pipeline of 110,000 rooms. The company opened 8,462 rooms during the quarter, closed 861 rooms, and ended the quarter with a total portfolio of nearly 577,000 rooms.

For the third quarter, Marriott expects adjusted diluted EPS from continuing operations of $0.09 to $0.14 per share, with comparable system-wide hotel RevPAR expected to decrease 20% to 23% in North America and 22% to 24% in all the other regions.

For full year 2009, Marriott expects EPS in the range of $0.76 to $0.86, although management has resisted from predicting results with any finality. This includes an expected decline of 17% to 20% in RevPAR of both comparable system-wide hotels in North America and elsewhere.

As a result of the recession, both business and leisure travel have decreased. Companies are curtailing expenses and restricting business trips and retreats. Hotel operators such as Marriott and Starwood Hotels (HOT) have had to resort to leisure travelers who are more vulnerable to price shifts.

We expect the operating environment in the lodging sector to remain weak throughout 2009 with substantial RevPAR declines forecasted. Given our forecast for negative earnings growth in 2009, along with the ongoing uncertainty regarding the state of the economy and its potential impact on Marriott’s lodging and timeshare businesses, we rate the shares of Marriott a Sell.
Read the full analyst report on "MAR"
Read the full analyst report on "HOT"
Zacks Investment Research

Zacks Analyst Blog Highlights: Starwood Hotels, Marriott International, American Public Education, Strayer Education and Devry Inc. – Press Releases

Zacks Market Commentaries — Mon, 06 Jul 2009 14:16:56 +0000

For Immediate Release

Chicago, IL - July 6, 2009 - Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Starwood Hotels (HOT), Marriott International (MAR), American Public Education (APEI), Strayer Education (STRA) and Devry Inc. (DV).

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Here are highlights from Friday's Analyst Blog:

Hotel Metrics Stay Down

We have been negative on the lodging sector for months, as we have maintained that investors have been too optimistic regarding the chances for a second-half recovery in the group.

Earlier this week, an analyst at a major Wall Street brokerage firm lowered their outlook on the group to negative, and lowered their rating on shares of Starwood Hotels (HOT) and Marriott International (MAR) to Underweight.

We have had Sell ratings on these shares for some time, and as we recently noted, the shares have begun to pull back after rallying along with the broad market for approximately three months.

As the challenges facing the group going forward become more obvious, we anticipate that more investors will realize that a near-term recovery in operating fundamentals is highly unlikely. As a result, we expect to see more pressure on the shares of lodging companies in the coming months.

Bullish on Online Education

The outlook for the post-secondary education industry, especially the online segment, is positive. This industry is comprised of traditional public and private traditional colleges and universities, as well as a number of for-profit institutions offering online programs, such as American Public Education (APEI), Strayer Education (STRA) and Devry Inc. (DV). Most of these colleges and universities target working adults in addition to traditional 18- to 24-year-old students.

The U.S. market for post-secondary education is large, growing and highly fragmented. The U.S. Bureau of Labor Statistics reported that approximately 61 million working adults in the United States do not have more than high school education and approximately 32 million adults have some college experience but no degree. In addition, adults represent 39% of total post-secondary education enrollment.

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Hotel Metrics Stay Down – Analyst Blog

Zacks Market Commentaries — Thu, 02 Jul 2009 20:25:40 +0000

Hotel Metrics Down, Others Finally Catching On

The second quarter of 2009 proved to be even more challenging than the first for hotel companies in the United States. And as it becomes increasingly clear that a recovery in the industry isn’t likely to happen any time in the near term, others on Wall Street have begun to change their outlooks.

After declining 19.0% in the first quarter of the year, weekly average revenue per available room, or RevPAR, declined 20.1% in the second quarter. Looking at the composition of these numbers, however, we see that the damage to the businesses was even greater than the 110 basis point change.

Average weekly occupancy declined 11.6% in the second quarter, compared to a decline of 12.5% year-over-year in the first quarter. However, hoteliers began cutting room rates more substantially during the just-ended quarter, with Q2 average daily rate, or ADR, down 9.6% versus the year-ago period. In the first quarter, ADR was down 7.4% year-over-year.

By continuing to cut room rates in an attempt to fill rooms, we believe that the hotel operators are actually more likely to increase the length and severity of this downturn. Changes in ADR have a greater impact on profitability, as more of the change falls directly to the bottom line. In addition, hotel companies will likely have difficulty pushing room rates higher even after the economy has stabilized.

We have been negative on the lodging sector for months, as we have maintained that investors have been too optimistic regarding the chances for a second-half recovery in the group.

Earlier this week, an analyst at a major Wall Street brokerage firm lowered their outlook on the group to negative, and lowered their rating on shares of Starwood Hotels (HOT) and Marriott International (MAR) to Underweight.

We have had Sell ratings on these shares for some time, and as we recently noted, the shares have begun to pull back after rallying along with the broad market for approximately three months.

As the challenges facing the group going forward become more obvious, we anticipate that more investors will realize that a near-term recovery in operating fundamentals is highly unlikely. As a result, we expect to see more pressure on the shares of lodging companies in the coming months.
Read the full analyst report on "MAR"
Read the full analyst report on "HOT"
Zacks Investment Research

Red Roof Inn Collapses – Analyst Blog

Zacks Market Commentaries — Wed, 24 Jun 2009 14:30:51 +0000

Another Major Hotel Default

Privately-owned hotel chain Red Roof Inn has defaulted on $467 million in mortgage debt.

The news is yet another example of the impact that the current operating downturn is having on highly-leveraged hotel companies. Given our present outlook for the industry, we would expect more such news in the near term.

Already this month we have seen a high-profile publicly-traded REIT default on a mortgage and hand over a high-end hotel to its lenders, as well as the bankruptcy filing of another highly-leveraged private hotel chain.

These mark just the most notable such examples, as many individual hotels throughout the country have defaulted on their debt and have declared bankruptcy.

Average weekly revenue per available room, or RevPAR, is down near 20% year-to-date. Deterioration of this magnitude puts an incredible amount of stress on even the best capitalized hotel owners. In the case of highly-levered firms with little or no balance sheet flexibility, it can be enough to sink the company entirely.

Large hotel franchisors such as Starwood Hotels Worldwide (HOT) and Marriott International (MAR) have for the most part exited the hotel-ownership business. While each company continues to hold some property assets, the majority of their business stems from franchising, licensing and managing hotels utilizing their brands.

While this business shift has protected the companies to some extent during this downturn, the massive declines in occupancy and room rate still have a major impact on their bottom-line profitability. We project that earnings per share will decline this year by more than 35% at Marriott and by more than 60% at Starwood.

Despite the obvious headwinds in the industry, lodging stocks had remained resilient, moving higher along with the market since early March. Recently, however, the stocks have shown signs of weakness.

As we do not expect a quick turnaround in industry fundamentals, we expect that the shares will remain under pressure going forward. Additionally, as more hotel owners default on their debt or file for bankruptcy, the stocks are subject to some measure of headline risk in the near term.

We reiterate our negative outlook on the group, as well as our Sell ratings on both Starwood and Marriott.
Read the full analyst report on "MAR"
Read the full analyst report on "HOT"
Zacks Investment Research

Hotel Stocks Showing Weakness – Analyst Blog

Zacks Market Commentaries — Mon, 22 Jun 2009 20:05:41 +0000

Hotel operating metrics continue to slide, and lodging company share prices have begun to show some weakness after months of resiliency.

According to data released from Smith Travel Research, Inc., average weekly occupancy fell 10.1% last week, while average daily room rate, or ADR, fell 9.4% versus the year-ago period.

Together, this resulted in a 18.6% year-over-year decline in revenue per available room, or RevPAR, a key hotel industry operating metric.

The declines in room rate remain particularly troubling, as companies attempt to fill rooms by lowering prices. Ultimately, we believe that this strategy will increase both the severity and length of the industry's downturn.

Hotel stocks had remained resilient over recent months in spite of the ongoing streak of bleak operating statistics reported thus far this year. However, the shares have pulled back in recent days.

Over the last two weeks, shares of Starwood Hotels & Resorts (HOT) have fallen more than 18%, while shares of Marriott International (MAR) have declined nearly 15%. This compares to a decline in the S&P 500 Index of just under 5% over the same time period.

We continue to believe that investors in lodging stocks have been overly optimistic regarding the chances of a second-half recovery in operating fundamentals. While we acknowledge that the year-over-year comparisons will likely improve in the back half of the year, we expect that the change will simply reflect the poor performance in the second-half of 2008, rather than a material improvement in current conditions.

In light of the significant room discounting currently underway in the industry, we anticipate that the present downturn in operating fundamentals will persist longer than is generally expected by many lodging industry investors. As such, we believe that hotel company shares will continue to decline in the near-term.

We maintain our negative outlook on the group, and reiterate our Sell ratings on both Starwood and Marriott.
Read the full analyst report on "HOT"
Read the full analyst report on "MAR"
Zacks Investment Research

Hotels & Lodging – Industry Outlook

Zacks Market Commentaries — Tue, 16 Jun 2009 20:40:35 +0000

As the recession continues, hotel industry operating metrics are showing no signs of improvement, as both business and leisure travelers are cutting back.

OUTLOOK

The lodging industry is facing significant challenges stemming from the economic recession, as both business and consumers are cutting back on travel expenditures. When evaluating hotel companies like Starwood (HOT) and Marriott (MAR) during this down cycle, we will be paying especially close attention to changes in average daily room rates as an indication of how quickly the sector may recover once the economy improves.

A key operating metric in the lodging industry is RevPAR (revenue per available room). This metric is derived by multiplying the occupancy percentage of a hotel over a given period by the average daily room rate (ADR) over that same period. Changes in either occupancy or ADR will impact RevPAR, but with different implications for bottom-line profitability.

Given the current state of the U.S. economy, it is no surprise that hotel occupancy percentages have been down recently, and that additional deterioration is anticipated throughout 2009. In past downturns, some hotel owners have attempted to slash room rates in an attempt to fill beds. In most cases, this tactic will result in material long-term damage to the business, for two primary reasons:

First, increases in occupancy are accompanied by increases in operating expenses. For every room that is filled, there are additional costs such as housekeeping, laundry and utilities that must be paid. When room rates decline while variable operating expenses remain stable, margins are compressed. Changes in ADR, however, fall almost entirely to the bottom line.

Second, and more importantly, cuts to ADR are difficult to recoup when the operating environment eventually improves. After slashing room rates in an effort to fill a hotel, attempts to restore those rates to previous levels are likely to be met with significant resistance. As such, the ability to benefit from an improving economy will be delayed.

Ultimately, the ability of lodging companies to maintain room rates as much as possible should have the most significant impact on their ability to weather the downturn. By keeping an eye on changes in ADR, investors can gain some insight as to which companies are best poised to benefit when economic growth returns.

OPPORTUNITIES

We are not currently recommending the purchase of any large-cap lodging stocks. Although share prices have fallen considerably, much uncertainty remains. When researching potential investments in the sector, however, we would advise investors to pay close attention to the ADR reported by lodging companies. We expect that companies that are able to best maintain room rates through the downturn will be best positioned to capitalize once economic conditions do improve.

WEAKNESSES

We expect RevPAR to decline meaningfully in 2009. To this point, the majority of the declines have stemmed from occupancy losses. However, while occupancy declines have somewhat stabilized, the rate of decline in ADR has continued to increase. Given this trend, we currently expect the downturn to be deeper and more prolonged than currently anticipated by many investors.

Through the first 22 weeks of 2009, weekly RevPAR in the U.S. fell by an average of 19.6% year-over-year. The majority of this decline was attributable to decline in occupancy, as average weekly occupancy rates fell by 12.3%, but ADR also fell meaningfully, with an average weekly decline of 8.4% year-over-year. This pace of ADR deterioration has accelerated, from down 7.4% in the first quarter, to down 9.6% thus far in the second quarter.

Given the lower levels of room revenue, we expect margins to tighten materially during 2009, resulting in substantial year-over-year earnings declines.

We would continue to avoid lodging companies such as Marriott International (MAR) and Starwood Hotels & Resorts (HOT). The stocks have climbed along with the broad market over the last three months, and in light of our expectation for weak operating fundamentals going forward, we believe that the shares are due for a correction.

In addition, companies with weak balance sheets, or even limited financial flexibility, will likely have a harder time navigating the challenges created by the economic recession.

Zacks Investment Research

Zacks Analyst Blog Highlights: Marriott International, Starwood Hotels, Intercontinental Hotels Group, Wyndham Worldwide and Duke Realty. – Press Releases

Zacks Market Commentaries — Fri, 05 Jun 2009 12:25:41 +0000

For Immediate Release

Chicago, IL - June 5, 2009 - Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Marriott International (MAR), Starwood Hotels (HOT), Intercontinental Hotels Group (IHG), Wyndham Worldwide (WYN) and Duke Realty (DRE).

Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: http://at.zacks.com/?id=4579.

Here are highlights from Thursday's Analyst Blog:

Another Rough Week for Hotels

Chicago and New York City led the way lower last week, with ADR declines of 26.5% and 26.4%, respectively. These are major markets, with significant concentrations of hotels aligned with the large, publicly held lodging companies.

RevPAR declines were steep in the middle of the country last week, with Chicago, Detroit, and St. Louis posting the largest year-over-year declines, of 37.7%, 32.5%, and 30.5%, respectively. Next on the list was New York City, with a RevPAR decline of 30.2% versus the prior year.

Despite the continuing deterioration in operating fundamentals, hotel stocks have rallied in recent months, including Marriott International (MAR), Starwood Hotels (HOT), Intercontinental Hotels Group (IHG) and Wyndham Worldwide (WYN). We believe that these moves have been overdone, and are unwarranted. The sector has a history of false starts, as investors prematurely bid up shares in hopes of a quick recovery in the group. We expect that this will again be the case in this situation, and believe that hotel stocks are due for a correction.

Duke Realty Faces Headwinds

We maintain our Hold rating on Duke Realty (DRE), the 2nd largest mixed office/industrial REIT in the US. The company, formerly a large developer, will be scaling back new starts to deal with new economic realities. After a 75.2 million share offering, the company slashed its dividend by 32%. The equity sale enabled the company to strengthen the balance sheet and pay off debt, but it dilutes current shareholders.

In what we view as an emergency cash-raising move, the company sold shares at $7.65 per share. This ensures the company's survival, but Duke was trading at over $25.00 per share a year ago. Operations are fading and vacancies continue to increase in most of Duke's markets. In the absence of job growth, the company will have a hard time keeping its properties full, and we expect rents to fall as the company struggles to keep and attract new tenants.

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Contact:
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Visit: www.zacks.com

Zacks Investment Research

Another Rough Week For Hotels – Analyst Blog

Zacks Market Commentaries — Thu, 04 Jun 2009 19:57:48 +0000

Weekly average hotel room rates fell to their lowest level of the year last week, according to data from Smith Travel Research, Inc. Given the ongoing deterioration in operating fundamentals, we reiterate our negative outlook on the sector, as well as our Sell ratings on Marriott International ((MAR) and Starwood Hotels & Resorts (HOT).

Average occupancy levels declined 10.2% year-over-year to 51.6% during the week ended May 30, 2009. During the same period, average daily room rate, or ADR, fell 9.6% to $93.00. Together, this resulted in a decline in revenue per available room, or RevPAR, of 18.9% to $47.96. This was the lowest RevPAR level since late January.

Chicago and New York City led the way lower last week, with ADR declines of 26.5% and 26.4%, respectively. These are major markets, with significant concentrations of hotels aligned with the large, publicly held lodging companies.

RevPAR declines were steep in the middle of the country last week, with Chicago, Detroit, and St. Louis posting the largest year-over-year declines, of 37.7%, 32.5%, and 30.5%, respectively. Next on the list was New York City, with a RevPAR decline of 30.2% versus the prior year.

Despite the continuing deterioration in operating fundamentals, hotel stocks have rallied in recent months, including Marriott, Starwood, Intercontinental Hotels Group (IHG) and Wyndham Worldwide (WYN). We believe that these moves have been overdone, and are unwarranted. The sector has a history of false starts, as investors prematurely bid up shares in hopes of a quick recovery in the group. We expect that this will again be the case in this situation, and believe that hotel stocks are due for a correction.

We project that the current steps being taken by hotel companies to lower room rates in an effort to fill rooms will have long-lasting negative repercussions. In the short-term, the reductions to room rates are unlikely to be offset by occupancy gains, thus resulting in lower overall profitability.

More importantly, however, is our belief that the reductions in ADR will result in depressed room rates even after the economy stabilizes and begins to improve. This may in turn extend the downturn in the lodging industry.
Read the full analyst report on "MAR"
Read the full analyst report on "HOT"
Read the full analyst report on "IHG"
Read the full analyst report on "WYN"
Zacks Investment Research

Zacks Analyst Blog Highlights: Diamond Offshore Drilling, Inc., Marriott International, BJ’s Restaurants, Inc., News Corporation and CEMIG – Press Releases

Zacks Market Commentaries — Mon, 27 Apr 2009 13:11:58 +0000

For Immediate Release

Chicago, IL - April 27, 2009 - Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Diamond Offshore Drilling, Inc. (DO), Marriott International (MAR), BJ's Restaurants Inc. (BJRI), News Corporation (NWS) and CEMIG (CIG).

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Here are highlights from Friday's Analyst Blog:

Diamond Offshore Glitters

Deepwater drilling powerhouse Diamond Offshore Drilling, Inc. (DO) reported better-than-expected first-quarter earnings and announced another special dividend. We see few signs of the downturn in oilfield activity levels in Diamond's quarterly report -- a trend that we see continuing for many quarters to come.

Management did indicate on the call that fresh contracting activity has slowed down significantly, which will weigh on dayrates in contract rollovers. But Diamond has limited exposure to these softening fundamentals, particularly in its core deepwater drilling fleet. Approximately 95% of its deepwater fleet is booked for this year and the number for next year is 73%.

Marriott Rally Unwarranted

Today's strength in shares of Marriott International (MAR) was unwarranted, in our opinion, and we would use the rally as a selling opportunity.

Shares of Marriott rose more than 12% today after the company reported first-quarter results that exceeded Street expectations. The results were $0.11 above our estimate, and $0.10 above the Street consensus.

BJ's Beats Estimates

BJ's Restaurants Inc. (BJRI) reported better-than-expected earnings after the market closed today. EPS grew 20% to $0.14 per share in 1Q09, beating our estimate and the consensus by $0.02 on record low -- and potentially unsustainable -- G&A expenses.

Earnings at the microbrewery were fueled by unit expansion, with the number of restaurants open at March 31 rising by 22%. In response to a slowing economy, the company has slowed unit growth to a planned 12% in 2009.

NewsCorp: More Top-Level Changes

Since posting a weaker than expected 2Q09 financial result on February 5, 2009, the year so far for News Corporation (NWS) has been marked by a number of key personnel changes. Commencing with the stepping down of long-time employee, President and Chief Operating Officer and CEO of the Fox Group Peter Chernin, followed by the appointment of former AOL CEO Jonathan Miller to the position of Chairman and Chief Executive Officer, Digital Media Group and Chief Digital Officer for News Corporation.

Finally, on Tuesday of this week, the company announced that MySpace CEO Chris DeWolfe would not be renewing his contract and stepping down in the near future. However, Mr. DeWolfe would remain on the board of MySpace China and continue to act as strategic advisor to the company.

CEMIG Continues to Expand

Yesterday CEMIG (CIG) announced the acquisition of Terna Participacoes by US$ 1.05 Billion. Terna belonged to the Italian group Rete Elettrica Nazionale S.p.A.. CEMIG acquired 65.86% of the shares of Terna and has an option for the remaining 34.14% of the company.

As we have stated in our last report on CIG, the company has an ambitious investment program for the next years, including an active role in the slowly consolidation of the Brazilian electrical industry. Even though CEMIG is a state owned company (it is controlled by the Government of the State of Minas Gerais in the Southeast of Brazil), it has been expanding nationally and internationally.

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About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today: http://at.zacks.com/?id=2677

About Zacks

Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Contact:
Mark Vickery
Web Content Editor
312-265-9380
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Zacks Investment Research

Hilton Sued for Corp. Espionage – Analyst Blog

Zacks Market Commentaries — Fri, 17 Apr 2009 15:01:19 +0000

Highlights include Starwood Hotels & Resorts Worldwide (HOT), Blackstone Group (BX) and Marriott International (MAR).

Allegations of corporate espionage have hit the hotel industry, as Starwood Hotels & Resorts Worldwide (HOT) announced last night that it has filed a lawsuit against Hilton Hotels Corporation, a subsidiary of the Blackstone Group (BX).

The suit alleges that two former Starwood executives, who moved to Hilton in June of last year, stole more than 100,000 electronic files from Starwood, including proprietary and highly confidential information. Starwood has accused Hilton and the two executives of committing corporate espionage, stealing trade secrets and unfair competition.

Starwood claims that this information was used by Hilton reduce the time, the risk and the cost required by Hilton to enter the lifestyle hotel market, and to reposition its luxury brands.

Last month, Hilton announced the introduction of Denizen Hotels, a new lifestyle brand. Starwood claims that confidential information about its W brand was used by Hilton in the creation of its Denizen brand. Starwood states that this information allowed Hilton to create a new brand in only nine months, compared what it claims is the usual three to five years.

Starwood is seeking not only monetary damages, but a court order that would require Hilton to destroy all materials derived from Starwood’s confidential files, including plans for the promotion and roll out of the Denizen brand. This could potentially force Hilton to cancel the rollout of the new chain.

The hotel industry is in the midst of an extremely challenging operating environment (please link to my blog post this morning - Worst Week Yet). Operating metrics continue to deteriorate, and competition among the large companies in the industry, including Starwood, Hilton, and Marriott (MAR) is fierce.

We expect that this lawsuit will take quite a while before it is resolved, but a victory for Starwood could prove to be beneficial, especially once the operating environment improves. In the near-term, however, we do not expect that the news should materially move the stock.

Read the full analyst report on "HOT"
Read the full analyst report on "MAR"
Zacks Investment Research

Gannett Gets Boost from Investor – Analyst Blog

Zacks Market Commentaries — Tue, 14 Apr 2009 15:16:02 +0000

Highlights include Gannett Co. (GCI), The New York Times Co. (NYT), Lee Enterprises (LEE), Washington Post Co. (WPO) and The E.W. Scripps Company (SSP).

Gannett Shares Rocket as Investor Ups Stake

Strong flagship paper and controlling stake in classified website allure investor

Shares of Gannett Co. (GCI), the publisher of USA Today, jumped 8.3% Monday following an announcement last week that a major shareholder had more than doubled it stake the company.

The investment echoes our thesis that publishers with strong national brands, an aggressive online strategy and a manageable debt load are more likely to withstand the recession and adapt their business models for future profitability.

That is not to say Gannett is immune from the troubles facing the industry. Like its competitors -- including The New York Times Co. (NYT), Lee Enterprises (LEE), Washington Post Co. (WPO) and The E.W. Scripps Company (SSP) -- Gannett, the country's largest newspaper publisher with over 85 dailies, is suffering accelerating declines in ad revenue and circulation. The company recently announced that it expected first-quarter ad revenue to fall by 35% year-over-year.

In the latest blow, Marriott International plans to stop delivering newspapers automatically at guests' doors in June, but rather upon request only. USA Today and The Wall Street Journal are the two most frequently delivered papers.

When the economy soured, newspaper publishers already had been suffering circulation declines for several years as readers moved online.

In attempt to slash costs fast enough to meet falling revenues, publishers have been firing staff, forcing pay cuts, trimming dividends, sharing reporter pools and printing operations, moving online and in a last resort, filing for bankruptcy to stave off creditors. Many have closed altogether. Gannett has fired thousands of employees over the last year and recently launched an exchange offer to push out its debt - all due in 2011 and 2012 - by four years.

What sets Gannett apart from the pack is its thriving USA Today online operations, which grew ad revenue by 27% in February, and its majority stake in job-hunting website, careerbuilder.com. While national advertising will rebound somewhat with the economy, a portion of classified has moved to wider-spread, more targeted, lower-priced or free options, such as eBay or Craigslist, and will not likely return.

Gannett's investment positions it to capture that growing business and recover with the economy, while other classified-heavy publications continue to languish.
Read the full analyst report on "GCI"
Read the full analyst report on "NYT"
Read the full analyst report on "LEE"
Read the full analyst report on "WPO"
Read the full analyst report on "SSP"
Zacks Investment Research

Zacks Industry Outlook Highlights: Starwood Hotels & Resorts and Marriott International – Press Releases

Zacks Market Commentaries — Tue, 31 Mar 2009 12:20:12 +0000

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For Immediate Release

Chicago, IL - March 31, 2009 - Zacks.com announces the latest Industry Outlook. Today's outlook from Zacks Equity Research analyst Sean P. Smith discusses the Hotels & Lodging sector. Highlighted stocks include: Starwood (HOT) and Marriott (MAR).

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Here is the latest on the Hotels & Lodging sector:

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Zacks Investment Research

Hotels & Lodging – Industry Outlook

Zacks Market Commentaries — Mon, 30 Mar 2009 20:15:47 +0000

As the recession continues, hotel industry operating metrics are showing no signs of improvement as both business and leisure travelers are cutting back.

OUTLOOK

The lodging industry is facing significant challenges stemming from the economic recession, as both business and consumers are cutting back on travel expenditures. When evaluating hotel companies like Starwood (HOT) and Marriott (MAR) during this down cycle, we will be paying especially close attention to changes in average daily room rates as an indication of how quickly the sector may recover once the economy improves.

A key operating metric in the lodging industry is RevPAR (revenue per available room). This metric is derived by multiplying the occupancy percentage of a hotel over a given period by the average daily room rate (ADR) over that same period. Changes in either occupancy or ADR will impact RevPAR, but with different implications for bottom-line profitability.

Given the current state of the U.S. economy, it is no surprise that hotel occupancy percentages have been down recently, and that additional deterioration is anticipated throughout 2009. In past downturns, some hotel owners have attempted to slash room rates in an attempt to fill beds. In most cases, this tactic will result in material long-term damage to the business, for two primary reasons:

First, increases in occupancy are accompanied by increases in operating expenses. For every room that is filled, there are additional costs such as housekeeping, laundry and utilities that must be paid. When room rates decline while variable operating expenses remain stable, margins are compressed. Changes in ADR, however, fall almost entirely to the bottom line.

Second, and more importantly, cuts to ADR are difficult to recoup when the operating environment eventually improves. After slashing room rates in an effort to fill a hotel, attempts to restore those rates to previous levels are likely to be met with significant resistance. As such, the ability to benefit from an improving economy will be delayed.

Ultimately, the ability of lodging companies to maintain room rates as much as possible should have the most significant impact on their ability to weather the downturn. Cutting rates meaningfully should be an absolute last ditch effort to survive, because changes in rate have the biggest impact on the bottom line, and are hardest to recoup when the operating environment improves. By keeping an eye on changes in ADR, investors can gain some insight as to which companies are best poised to benefit when economic growth returns.

OPPORTUNITIES

We are not currently recommending the purchase of any large-cap lodging stocks. Although share prices have fallen considerably, much uncertainty remains. When researching potential investments in the sector, however, we would advise investors to pay close attention to the ADR reported by lodging companies. We expect that companies that are able to best maintain room rates through the downturn will be best positioned to capitalize once economic conditions do improve.

WEAKNESSES

We expect RevPAR to decline meaningfully in 2009, with the majority of the declines stemming from occupancy losses, while the companies attempt to hold ADR as steady as possible. If, however, we see room rates declining significantly, we would then expect the downturn to be deeper and more prolonged than currently anticipated.

Through the first 11 weeks of 2009, weekly RevPAR in the U.S. fell by an average of 18.9% year-over-year. The majority of this decline was attributable to decline in occupancy, as average weekly occupancy rates fell by 12.5%, but ADR also fell meaningfully, with an average weekly decline of more than 7% year-over-year.

Even for the firms that are able to maintain room rates, however, it will likely be some time before the operating environment improves. Margins are expected to tighten during 2009, and earnings are projected to decline substantially year-over-year.

We would continue to avoid lodging companies such as Marriott International (MAR) that have significant exposure to the time-share industry, given the poor fundamentals in residential real estate.

In addition, companies with weak balance sheets, or even limited financial flexibility, will likely have a harder time navigating the challenges created by the recession.

Zacks Investment Research

Zacks Bull & Bear of the Day Highlights: TransDigm Group, Satyam Computer Services, Apartment Investment, Mid-America Apartment and Marriott – Press Releases

Zacks Market Commentaries — Thu, 19 Mar 2009 13:35:17 +0000

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For Immediate Release

Chicago, IL March 19, 2009 Zacks Equity Research picks TransDigm Group (TDG) as Bull of the Day and Satyam Computer Services Ltd. (SAY) as Bear of the Day. In addition, the analysts at Zacks Equity Research discuss the latest on Apartment Investment (AIV), Mid-America Apartment Communities (MAA) and Marriott International (MAR).

Full analysis of all these stocks is available at: http://at.zacks.com/?id=2678

Bull of the Day

TransDigm Group (TDG) reported some remarkable results for its fiscal 2009 first quarter, when compared to the same period last fiscal year. Net sales of $181.3 million, were up 11.1% (organic sales growth - which excludes recent acquisitions - was 2.7%).

Airlines continue to ground aircraft, which certainly is having a negative effect on MRO [maintenance, repair and operations] revenues. Further, the current worldwide economic malaise is causing orders for new aircraft to evaporate -- or at least be stretched out -- ala 9-11.

In addition, the future of Aerospace/Defense stocks is clouded by the in-process alterations the current administration is making to defense expenditures. Even with this unsettling environment, the Zacks opinion on TDG currently is Buy.

Bear of the Day

With the arrest of both Satyam Computer Services Ltd.'s (SAY) ex-CEO and ex-CFO, the interim management announced that it'll make all attempts to clean up its books and appoint a new auditor. A new Board has been formed to spearhead the task of salvaging the company, and three members have already been appointed by the Government of India itself.

A majority stake sale is currently being undertaken, and the Board of Directors announced that it will release the Request for Proposals (RFP) to all registered bidders. Previously, the Indian government announced that it would not step up to help Satyam with any financial assistance, citing the company's current receivables of approx. $350 million.

Given the recent developments, we had earlier downgraded SAY shares to a Sell and have suspended our estimates and target price.

Recent Analysis from the Analyst Blog

Inflation or Deflation?

The Core CPI, which strips out volatile food and energy prices, has been low and stable over the past 7 months, never rising more than 0.2% and never actually dipping into negative territory. The core CPI came in at 0.2% in both January and February.

Digging deeper, the housing portion of the index was unchanged for the 3rd straight month. At least this means that rents are not falling on a nationwide basis, and alleviates some of the concerns that investors in Apartment REITs like Apartment Investment (AIV) and Mid-America Apartment Communities (MAA). If they were, the potential future declines in housing prices would increase.

The "lodging away from home" part is another story. Hotel prices fell 1.8% for the month, and marked the 5th straight decline. This is clearly not good news for firms like Marriott International (MAR).

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About the Bull and Bear of the Day

Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.

About the Analyst Blog

Updated throughout every trading day, the Analyst Blog provides analysis from Zacks Equity Research about the latest news and events impacting stocks and the financial markets.

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today by visiting http://at.zacks.com/?id=2677.

About Zacks

Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Contact:

Mark Vickery

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312-265-9380

Visit: www.zacks.com

Zacks Investment Research

OMGI Trades below Average Volume – Zacks Tale of the Tape

Zacks Market Commentaries — Wed, 18 Mar 2009 20:31:49 +0000

Orion Marine Group Inc (OMGI) shares recorded an unusually low trading volume today. Shares rose almost 1% at $12.10 in the afternoon trading.

Zacks Investment Research

Inflation or Deflation? – Analyst Blog

Dirk Van Dijk — Wed, 18 Mar 2009 20:30:31 +0000

Highlights include Apartment Investment (AIV), Mid-America Apartment Communities (MAA), Marriott International (MAR) and Starwood Hotels & Resorts (HOT).

The specter that has been haunting the markets is the specter of deflation. Those concerns have been partially assuaged by the release yesterday of the Producer Price Index (PPI) and of the Consumer Price Index today (CPI). The CPI came in at an increase of 0.4% on a headline basis, following a 0.3% rise in January.

The increase was largely the result of higher energy costs, particularly for gasoline. Prior to these back-to-back increases, the headline CPI had declined for 3 straight months, by 0.8% in December and October, and by 1.7% in November. The fears that we were headed into deflation were clearly not unfounded.

However, those declines were due to the collapse in energy prices. The Core CPI, which strips out volatile food and energy prices, has been low and stable over the past 7 months, never rising more than 0.2% and never actually dipping into negative territory. The core CPI came in at 0.2% in both January and February.

Digging deeper, the housing portion of the index was unchanged for the 3rd straight month. At least this means that rents are not falling on a nationwide basis, and alleviates some of the concerns that investors in Apartment REITs like Apartment Investment (AIV) and Mid-America Apartment Communities (MAA). If they were, the potential future declines in housing prices would increase.

The "lodging away from home" part is another story. Hotel prices fell 1.8% for the month, and marked the 5th straight decline. This is clearly not good news for firms like Marriott (MAR) and Starwood (HOT).

So are we out of the deflationary woods?

The PPI data provides mixed signals in that regard. Unlike the CPI, it is reported at several different levels: Finished, Intermediate and Crude. Think of them as Bread, Flour and Wheat.

The finished goods level ("bread") is the one that is most widely reported in the press, and like the CPI is reported on both a headline and a core basis. Headline PPI rose 0.1% in February, down rather sharply from a 0.8% rise in January. However, prior to January, it had been in a steep decline, with 5 straight negative numbers, including back-to-back 2.6% declines in October and November, and a 1.9% drop in December.

Keep in mind that these are month-to-month changes, not seasonally adjusted annual rates. Thus, those declines are very large indeed.

However, as with the CPI, those declines were mostly due to the path of Energy prices. On a core basis, there has been only one decline in the PPI over the last year, and that was a 0.1% decline in November. In February, core PPI came in at 0.2% following a 0.4% rise in January. Well so far so good -- looks like deflation has been avoided, especially when one excludes energy prices.

The problem comes when you look farther back up the chain. At the intermediate goods level ("flour") prices fell 0.9% in February following a 0.7% decline in January. The February decline marked 7 straight months of falling prices. Even so, the declines were noticeably smaller in the first 2 months of this year than they were in the 4th quarter of last year when they were falling by at least 4.0% per month. Even when you strip out food and energy prices, at the intermediate level deflation seems to have a fairly firm grip. On a core basis, intermediate goods prices have been down for 5 straight months.

The picture is even more extreme at the crude goods level ("wheat") which is not unusual; crude goods prices are essentially commodities and tend to swing wildly in price. On a headline basis, crude goods are down for 7 straight months, including a 4.5% drop in February which followed a 2.9% decline in January. However, once food and energy prices are stripped away, crude goods rose 1.5% in February following a 0.1% rise in January.

All in all, the low but positive inflation we are seeing is good news for the economy and the markets. It will take a few months to be absolutely sure that the potential deflationary storm has passed, but so far, so good.

Read the full analyst report on "AIV"
Read the full analyst report on "MAA"
Read the full analyst report on "MAR"
Read the full analyst report on "HOT"
Zacks Investment Research

Marriott International (MAR) – Bear of the Day

Zacks Market Commentaries — Tue, 17 Feb 2009 05:00:00 +0000

Marriott International Inc. (MAR) is a leading worldwide hospitality company with a primary focus on property management and franchising. We maintain our Sell rating on shares of Marriott, following the release of 4th quarter results.

The operating environment in the lodging sector is expected to remain weak throughout 2009 with substantial RevPAR declines forecasted. Additionally, the company's timeshare segment is struggling, with sales down and credit market turmoil preventing the company from completing note sales.

Hotels & Lodging

Zacks Market Commentaries — Fri, 06 Feb 2009 17:07:42 +0000

As the recession continues, hotel industry operating metrics are showing no signs of improvement as both business and leisure travelers are cutting back.

OUTLOOK

The lodging industry is facing significant challenges stemming from the economic recession, as both business and consumers are cutting back on travel expenditures. When evaluating hotel companies like Starwood (HOT) and Marriott (MAR) during this down cycle, we will be paying especially close attention to changes in average daily room rates as an indication of how quickly the sector may recover once the economy improves.

A key operating metric in the lodging industry is RevPAR (revenue per available room). This metric is derived by multiplying the occupancy percentage of a hotel over a given period by the average daily room rate (ADR) over that same period. Changes in either occupancy or ADR will impact RevPAR, but with different implications for bottom-line profitability.

Given the current state of the U.S. economy, it is no surprise that hotel occupancy percentages have been down recently, and that additional deterioration is anticipated throughout 2009. In past downturns, some hotel owners have attempted to slash room rates in an attempt to fill beds. In most cases, this tactic will result in material long-term damage to the business, for two primary reasons.

First, increases in occupancy are accompanied by increases in operating expenses. For every room that is filled, there are additional costs such as housekeeping, laundry, and utilities that must be paid. When room rates decline while variable operating expenses remain stable, margins are compressed. Changes in ADR, however, fall almost entirely to the bottom line.

Second, and most importantly, cuts to ADR are difficult to recoup when the operating environment eventually improves. After slashing room rates in an effort to fill a hotel, attempts to restore those rates to previous levels are likely to be met with significant resistance. As such, the ability to benefit from an improving economy will be delayed.

Ultimately, the ability of lodging companies to maintain room rates as much as possible should have the most significant impact on their ability to weather the downturn. Cutting rates meaningfully should be an absolute last ditch effort to survive, because changes in rate have the biggest impact on the bottom line, and are hardest to recoup when the operating environment improves. By keeping an eye on changes in ADR, investors can gain some insight as to which companies are best poised to benefit when economic growth returns.

OPPORTUNITIES

We are not currently recommending the purchase of any large-cap lodging stocks. Although share prices have fallen considerably, much uncertainty remains. When researching potential investments in the sector, however, we would advise investors to pay close attention to the ADR reported by lodging companies. We expect that companies that are able to best maintain room rates through the downturn will be best positioned to capitalize once economic conditions do improve.

WEAKNESSES

We expect RevPAR to decline meaningfully in 2009, with the majority of the declines stemming from occupancy losses, while the companies attempt to hold ADR as steady as possible. If, however, we see room rates declining significantly, we would then expect the downturn to be deeper and more prolonged that currently anticipated.

During the first four weeks of 2009, weekly RevPAR in the U.S. fell by an average of 18.5% year-over-year. The majority of this decline was attributable to decline in occupancy, as average weekly occupancy rates fell by 7.5 percentage points, but ADR also fell meaningfully, with an average weekly decline of more than 5% year-over-year.

Even for the firms that are able to maintain room rates, however, it will likely be some time before the operating environment improves. Margins are expected to tighten during 2009, and earnings are projected to decline substantially year-over-year.

We would avoid lodging companies such as Marriott International (MAR) that have both exposure to lower-end hotel chains and significant exposure to the time-share industry, given the poor fundamentals in residential real estate.

In addition, companies with weak balance sheets, or even limited financial flexibility, will likely have a harder time navigating the challenges created by the recession.

"MAR" Free Stock Analysis: Buy? Sell? Hold?
"HOT" Free Stock Analysis: Buy? Sell? Hold?
Zacks Investment Research

Hotels & Lodging – Zacks Analyst Interviews

Zacks Market Commentaries — Wed, 31 Dec 2008 00:00:00 +0000

As the recession continues, hotel companies that are able to limit the degree to which room rates are discounted will be in the best position to benefit once the economic environment improves.

OUTLOOK

A key operating metric in the lodging industry is RevPAR (revenue per available room). This metric is derived by multiplying the occupancy percentage of a hotel over a given period by the average daily room rate (ADR) over that same period. Changes in either occupancy or ADR will impact RevPAR, but with different implications for bottom-line profitability.

Given the current state of the U.S. economy, it is no surprise that hotel occupancy percentages have been down recently, and that additional deterioration is anticipated throughout 2009. In past downturns, some hotel owners have attempted to slash room rates in an attempt to fill beds. In most cases, this tactic will result in material long-term damage to the business, for two primary reasons.

First, increases in occupancy are accompanied by increases in operating expenses. For every room that is filled, there are additional costs such as housekeeping, laundry and utilities that must be paid. When room rates decline while variable operating expenses remain stable, margins are compressed. Changes in ADR, however, fall almost entirely to the bottom line.

Second, and most importantly, cuts to ADR are difficult to recoup when the operating environment eventually improves. After slashing room rates in an effort to fill a hotel, attempts to restore those rates to previous levels are likely to be met with significant resistance. As such, the ability to benefit from an improving economy will be delayed.

Ultimately, the ability of lodging companies to maintain room rates as much as possible should have the most significant impact on their ability to weather the downturn. Cutting rates meaningfully should be an absolute last-ditch effort to survive, because changes in rate have the biggest impact on the bottom line, and are hardest to recoup when the operating environment improves. By keeping an eye on changes in ADR, investors can gain some insight as to which companies are best poised to benefit when economic growth returns.

OPPORTUNITIES

We are not currently recommending the purchase of any large-cap lodging stocks. Although share prices have fallen considerably, much uncertainty remains. When researching potential investments in the sector, however, we would advise investors to pay close attention to the ADR reported by lodging companies. We expect that companies that are able to best maintain room rates through the downturn will be best positioned to capitalize once economic conditions do improve.

WEAKNESSES

We expect RevPAR to decline meaningfully in 2009, with the majority of the declines stemming from occupancy losses, while the companies attempt to hold ADR as steady as possible. If, however, we see room rates declining significantly, we would then expect the downturn to be deeper and more prolonged than currently anticipated.

Even for the firms that are able to maintain room rates, however, it will likely be some time before the operating environment improves. Margins are expected to tighten during 2009, and earnings are projected to decline year-over-year.

We would avoid lodging companies such as Marriott International (MAR) that have both exposure to lower-end hotel chains and significant exposure to the time-share industry, given the poor fundamentals in residential real estate.

In addition, companies with weak balance sheets, or even limited financial flexibility, will likely have a harder time navigating the challenges created by the recession.
"MAR" Free Stock Analysis: Buy? Sell? Hold?
"HOT" Free Stock Analysis: Buy? Sell? Hold?
Zacks Investment Research

Marriott Sell Rating Maintained – Analyst Blog

Zacks Market Commentaries — Tue, 30 Dec 2008 16:51:38 +0000

We maintain our Sell rating on shares of Marriott International (MAR). The operating environment in the lodging sector has weakened substantially in recent quarters. Additionally, the company's timeshare segment is struggling, with sales down and credit market turmoil preventing the company from completing an expected note sale.

Given our forecast for negative earnings growth in 2009, along with the ongoing uncertainty regarding the state of the economy and its potential impact on Marriott's lodging and timeshare businesses, we rate the shares a Sell at this time.

Marriott's low-end properties have experienced the greatest level of operating challenges to this point of the current downturn. The higher-end market as outperformed to this point, as group business remains relatively steady and consumers have yet to "trade down" to lower-cost chains. On the positive side, the lodging industry has shown a willingness to maintain average daily rates (ADR) to this point in the downturn.

Our $15.00 six-month target price equates to an EPS multiple of approximately 12.0x our 2009 estimate, and roughly 7.7x our 2009 EBITDA estimate.

Read the full analyst report on MAR

"MAR" Free Stock Analysis: Buy? Sell? Hold?
Zacks Investment Research

Hotels & Lodging

Zacks Market Commentaries — Tue, 30 Dec 2008 15:40:00 +0000

As the recession continues, hotel companies that are able to limit the degree to which room rates are discounted will be in the best position to benefit once the economic environment improves.

OUTLOOK

The lodging industry is facing significant challenges stemming from the economic recession, as both business and consumers are cutting back on travel expenditures. When evaluating hotel companies like Starwood Hotels (HOT) and Marriott International (MAR) during this down-cycle, we will be paying especially close attention to changes in average daily room rates as an indication of how quickly the sector may recover once the economy improves.

A key operating metric in the lodging industry is RevPAR (revenue per available room). This metric is derived by multiplying the occupancy percentage of a hotel over a given period by the average daily room rate (ADR) over that same period. Changes in either occupancy or ADR will impact RevPAR, but with different implications for bottom-line profitability.

Given the current state of the U.S. economy, it is no surprise that hotel occupancy percentages have been down recently, and that additional deterioration is anticipated throughout 2009. In past downturns, some hotel owners have attempted to slash room rates in an attempt to fill beds. In most cases, this tactic will result in material long-term damage to the business, for two primary reasons.

First, increases in occupancy are accompanied by increases in operating expenses. For every room that is filled, there are additional costs such as housekeeping, laundry and utilities that must be paid. When room rates decline while variable operating expenses remain stable, margins are compressed. Changes in ADR, however, fall almost entirely to the bottom line.

Second, and most importantly, cuts to ADR are difficult to recoup when the operating environment eventually improves. After slashing room rates in an effort to fill a hotel, attempts to restore those rates to previous levels are likely to be met with significant resistance. As such, the ability to benefit from an improving economy will be delayed.

Ultimately, the ability of lodging companies to maintain room rates as much as possible should have the most significant impact on their ability to weather the downturn. Cutting rates meaningfully should be an absolute last-ditch effort to survive, because changes in rate have the biggest impact on the bottom line, and are hardest to recoup when the operating environment improves. By keeping an eye on changes in ADR, investors can gain some insight as to which companies are best poised to benefit when economic growth returns.

OPPORTUNITIES

We are not currently recommending the purchase of any large-cap lodging stocks. Although share prices have fallen considerably, much uncertainty remains. When researching potential investments in the sector, however, we would advise investors to pay close attention to the ADR reported by lodging companies. We expect that companies that are able to best maintain room rates through the downturn will be best positioned to capitalize once economic conditions do improve.

WEAKNESSES

We expect RevPAR to decline meaningfully in 2009, with the majority of the declines stemming from occupancy losses, while the companies attempt to hold ADR as steady as possible. If, however, we see room rates declining significantly, we would then expect the downturn to be deeper and more prolonged than currently anticipated.

Even for the firms that are able to maintain room rates, however, it will likely be some time before the operating environment improves. Margins are expected to tighten during 2009, and earnings are projected to decline year-over-year.

We would avoid lodging companies such as Marriott International (MAR) that have both exposure to lower-end hotel chains and significant exposure to the time-share industry, given the poor fundamentals in residential real estate.

In addition, companies with weak balance sheets, or even limited financial flexibility, will likely have a harder time navigating the challenges created by the recession.

"HOT" Free Stock Analysis: Buy? Sell? Hold?
"MAR" Free Stock Analysis: Buy? Sell? Hold?
Zacks Investment Research

Room Rates Key for Hotel Industry – Analyst Blog

Zacks Market Commentaries — Mon, 22 Dec 2008 15:00:51 +0000

The lodging industry is facing significant challenges stemming from the economic recession, as both business and consumers are cutting back on travel expenditures. When evaluating hotel companies like Starwood Hotels (HOT) and Marriott International (MAR) during this down-cycle, we will be paying especially close attention to changes in average daily room rates as an indication of how quickly the sector may recover once the economy improves.

A key operating metric in the lodging industry is RevPAR (revenue per available room). This metric is derived by multiplying the occupancy percentage of a hotel over a given period by the average daily room rate (ADR) over that same period. Changes in either occupancy or ADR will impact RevPAR, but with different implications for bottom-line profitability.

Given the current state of the U.S. economy, it is no surprise that hotel occupancy percentages have been down recently, and that additional deterioration is anticipated throughout 2009. In past downturns, some hotel owners have attempted to slash room rates in an attempt to fill beds. In most cases, this tactic will result in material long-term damage to the business, for two primary reasons:

First, increases in occupancy are accompanied by increases in operating expenses. For every room that is filled, there are additional costs such as housekeeping, laundry and utilities that must be paid. When room rates decline while variable operating expenses remain stable, margins are compressed. Changes in ADR, however, fall almost entirely to the bottom line.

Second, and more importantly, cuts to ADR are difficult to recoup when the operating environment eventually improves. After slashing room rates in an effort to fill a hotel, attempts to restore those rates to previous levels are likely to be met with significant resistance. As such, the ability to benefit from an improving economy will be delayed.

Ultimately, the ability of lodging companies to maintain room rates as much as possible should have the most significant impact on their ability to weather the downturn. Cutting rates meaningfully should be an absolute last ditch effort to survive, because changes in rate have the biggest impact on the bottom line, and are hardest to recoup when the operating environment improves. By keeping an eye on changes in ADR, investors can gain some insight as to which companies are best poised to benefit when economic growth returns.

Read the full analyst report on HOT

Read the full analyst report on MAR

"HOT" Free Stock Analysis: Buy? Sell? Hold?
"MAR" Free Stock Analysis: Buy? Sell? Hold?
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Red Chip Featured Company: Bridgeline Software, Inc. (BLSW.OB)

QualityStocks — Tue, 07 Oct 2008 15:10:47 +0000

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Marriott Downgraded to Sell – Analyst Blog

Zacks Market Commentaries — Fri, 03 Oct 2008 12:46:05 +0000

We are lowering our rating on shares of Marriott International (MAR) from Hold to Sell following the release of Q3 financial results.

The operating environment in the lodging sector has weakened substantially in recent quarters. Additionally, the company's timeshare segment is struggling, with sales down and credit market turmoil preventing the company from completing an expected note sale.

Given our forecast for negative earnings growth in 2009, along with the ongoing uncertainty regarding the state of the economy and its potential impact on Marriott's lodging and timeshare businesses, we rate the shares a Sell at this time. Within North America, management expects that company-operated RevPAR [revenue per available room] will decline by at least 3% over the prior year. Given current conditions, we would not be surprised to see RevPAR decline exceed these expectations.

Read the full analyst report on MAR

"MAR" Free Stock Analysis: Buy? Sell? Hold?
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Earnings Preview for Sep 29 – Oct 3 – Earnings Preview

Charles Rotblut — Fri, 26 Sep 2008 00:00:00 +0000

As I write this on Friday morning, we are continuing to await a final decision on the proposed bailout of financial firms. The final outcome will impact market direction.

I would expect a short-term relief rally if the proposal is passed and signed. Failure to reach an agreement, however, could result in stocks setting new lows for the year.

Third-quarter earnings season will not "officially" start until Oct 7, when Alcoa (AA) reports. Nonetheless, 21 companies are confirmed to report during the week of Sep 29 - Oct 3. Among these are S&P 500 members Constellation Brands (STZ), Family Dollar (FDO), Marriott International (MAR), Micron Technology (MU), Pepsi Bottling Group (PBG) and Walgreen (WAG).

September employment data will be released on Friday, capping a busy week for economic data.

Monday: August personal income and spending
Tuesday: Conference Board September consumer confidence survey, September Chicago PMI
Wednesday: September ISM manufacturing index, September auto sales, August construction spending, weekly crude inventories
Thursday: August factory orders, weekly initial jobless claims
Friday: September unemployment and nonfarm payrolls, ISM services index

The Federal Reserve's web site is not listing any scheduled speeches from Fed officials.

Rosh Hashanah starts Monday at sundown. This should result in lower volume on Tuesday.

Companies That Could Issue Positive Earnings Surprises

Family Dollar Stores (FDO) enjoyed a 3.6% increase in same-store sales last month. Several of the covering brokerage analysts responded by raising their fiscal fourth-quarter profit projections. The consensus estimate now calls for the discount retailer to have earned 34 cents per share, a penny above the average forecast of a few weeks ago. The most accurate consensus is even more bullish at 35 cents per share. Family Dollar Store is scheduled to report on Friday, Oct 3, before the start of trading.

Companies That Could Issue Negative Earnings Surprises

Xyratex Ltd (XRTX) has missed consensus during 2 out of the past 4 quarters. Within the past week, 1 of the 5 covering brokerage analysts cut his profit forecast ahead of the company's fiscal third-quarter report. The revision sent the consensus estimate down by 2 cents to 33 cents per share. The most accurate estimate is more bearish at 28 cents per share. Xyratex is scheduled to reporton Tuesday, Sep 30, after close of trading.

Charles Rotblut, CFA is the senior market analyst for Zacks.com. He can be reached at crotblut@zacks.com.

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Earnings Calendar

Here is a list of companies that we have confirmed will report during the week of Sep 9 - Oct 3¹.

Company	Ticker	Zacks Consensus Estimate	Year Ago Actual	Last Qtr Surprise	Report Date	Report Time
Circuit City Gp	CC	($1.04)	($0.38)	2.0%	9/29/2008	BTO
Steelcase Inc	SCS	$0.22	$0.25	(9.1%)	9/29/2008	BTO
Walgreen Co	WAG	$0.45	$0.40	(1.7%)	9/29/2008	BTO
Landec Corp	LNDC	$0.10	$0.11	18.2%	9/30/2008	AMC
Pepsi Bottling	PBG	$1.04	$0.99	2.6%	9/30/2008	BTO
Xyratex Ltd	XRTX	$0.33	$0.17	16.67%	9/30/2008	AMC
Actuant Corp	ATU	$0.54	$0.49	1.8%	10/1/2008	BTO
Immucor	BLUD	$0.23	$0.25	13.0%	10/1/2008	AMC
Micron Tech	MU	($0.21)	($0.19)	3.3%	10/1/2008	AMC
Mosaic Co/The	MOS	$2.94	$0.64	15.6%	10/1/2008	AMC
Standard Micros	SMSC	$0.32	$0.42	66.7%	10/1/2008	AMC
Wolverine World	WWW	$0.60	$0.54	3.1%	10/1/2008	BTO
Angiodynamics	ANGO	$0.11	$0.10	17.6%	10/2/2008	AMC
Constellatn Brd	STZ	$0.44	$0.35	6.3%	10/2/2008	BTO
Demandtec Inc	DMAN	($0.03)	($0.10)	0.0%	10/2/2008	AMC
Global Payments	GPN	$0.60	$0.54	(2.0%)	10/2/2008	AMC
Lawson Software	LWSN	$0.05	$0.06	0.0%	10/2/2008	AMC
Marriott Intl-A	MAR	$0.32	$0.31	4.1%	10/2/2008	BTO
Msci Inc-A	MXB	$0.26	N/A	(28.0%)	10/2/2008	N/A
Resources Cnctn	RECN	$0.25	$0.23	16.7%	10/2/2008	AMC
Family Dollar	FDO	$0.34	$0.26	12.2%	10/3/2008	BTO

BMO = Before The Market Open, AMC = After Market Close

Aditi Samajpati contributed to this article.

¹Some of the companies listed in the earnings calendar may not be in the Zacks Rank universe.

"XRTX" Free Stock Analysis: Buy? Sell? Hold?
"PBG" Free Stock Analysis: Buy? Sell? Hold?
"MAR2" Free Stock Analysis: Buy? Sell? Hold?
"CDG" Free Stock Analysis: Buy? Sell? Hold?
"FDS1" Free Stock Analysis: Buy? Sell? Hold?
"DRAM" Free Stock Analysis: Buy? Sell? Hold?
"WAG" Free Stock Analysis: Buy? Sell? Hold?
"AA" Free Stock Analysis: Buy? Sell? Hold?
Zacks Investment Research