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Zacks Bull and Bear of the Day Highlights: Onyx, Starwood Hotels and Resorts Worldwide, D.R. Horton, Lennar and Beazer – Press Releases

Zacks Market Commentaries — Mon, 27 Jul 2009 14:00:42 +0000

For Immediate Release

Chicago, IL – July 27, 2009 – Zacks Equity Research highlights Onyx (ONXX) as the Bull of the Day and Starwood Hotels and Resorts Worldwide (HOT) the Bear of the Day. In addition, Zacks Equity Research provides analysis on D.R. Horton (DHI), Lennar (LEN) and Beazer (BZH).

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:

We maintain our Buy rating on Onyx (ONXX) shares with price target of $45.

Onyx delivered strong financial performance in 1Q09 and we expect the company will continue to deliver very good financials for 2009. Nexavar sales continued to grow in 1Q08, which was mainly attributed to the market penetration in liver cancer while market share has stabilized in kidney cancer market in spite of heavy competition. Total Nexavar sales came in at $178.1 million, up 17% year over year. This increase was mainly driven by international sales which reached $130 million, up 29% year over year.

Bear of the Day:

We maintain our Sell rating on shares of Starwood Hotels and Resorts Worldwide (HOT). The shares have climbed significantly since bottoming out in early March.

Industry fundamentals have continued to deteriorate, with year-to-date weekly revenue per available room, or RevPAR, down nearly 20% versus the year-ago period.

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).

Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: http://at.zacks.com/?id=5513

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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Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

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Zacks Investment Research

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

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: Sunstone Hotel Investors, Starwood Hotels & Resorts, American International Group, Citigroup and Bank of America. – Press Releases

Zacks Market Commentaries — Tue, 09 Jun 2009 13:18:22 +0000

For Immediate Release

Chicago, IL - June 9, 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: Sunstone Hotel Investors (SHO), Starwood Hotels & Resorts (HOT), American International Group (AIG), Citigroup (C) and Bank of America (BAC).

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 Monday's Analyst Blog:

High-Profile Hotel Default

Sunstone, a hotel REIT, acquired the W hotel in San Diego in 2006 for $96 million, or roughly $370,000 per room. At the time, the purchase price equated to a multiple of 12x projected 2006 EBITDA.

In conjunction with the purchase, the company closed on a $65 million first mortgage, bearing an interest rate of 6.14%.

The local hotel operating environment has weakened to the point that the company has decided to simply hand over the keys to the lender, as opposed to making another debt service payment, as management now believe that the property is worth "meaningfully below" the principal amount of the debt.

While there have been many hotel defaults in recent months, this is a high-profile transaction, involving a publicly held hotel REIT and a premium hotel brand. The W hotel brand is owned by Starwood Hotels & Resorts (HOT), which also manages the W San Diego property. There are currently only 29 W hotels worldwide, although the company has an additional 22 W hotels in its pipeline.

Administration Wants to Cap Pay

Recently, the administration was suggesting that those firms that received two Trouble-Asset Relief Program (TARP) infusions, such as American International Group (AIG) would have its compensation limitations placed on them. While we have some problems with this concept, it must be accepted that the government as a major shareholder does have the right to dictate terms of the employees at its investment.

However, from smoke signals in Washington it would now appear that President Obama may want to expand the curtailment of compensation to all financial services firms. This is not the area that the government should be meddling in. Raise oversight, increase regulation, make mandates on the type of mortgages a financial institution can make, what type of investment can be in the portfolio -- this is where the government should focus its attention.

Congressional oversight is one thing, micro-sight is another. Government should focus on the arena where the financial markets and investors operate, not what a trader, investment banker or stockbroker is paid.

Clearly, many of the managements of institutions such as but not limited to Citigroup (C), Bank of America (BAC) and General Motors were asleep at the switch for a couple of years earlier in the decade. However, employee pay is a discussion to be picked up by the board of directors and the shareholders of the companies in question.

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About Zacks

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

Contact:
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Visit: www.zacks.com

Zacks Investment Research

High-Profile Hotel Default – Analyst Blog

Zacks Market Commentaries — Mon, 08 Jun 2009 15:22:14 +0000

Last night, Sunstone Hotel Investors (SHO) announced that the company would turn over its W San Diego hotel property to its lenders, as opposed to making its June 1st debt service payment on the property’s mortgage. This move speaks volumes about the deterioration of the hotel operating environment in recent months, and in turn, the value of hotel properties.

Sunstone, a hotel REIT, acquired the W hotel in San Diego in 2006 for $96 million, or roughly $370,000 per room. At the time, the purchase price equated to a multiple of 12x projected 2006 EBITDA.

In conjunction with the purchase, the company closed on a $65 million first mortgage, bearing an interest rate of 6.14%.

The local hotel operating environment has weakened to the point that the company has decided to simply hand over the keys to the lender, as opposed to making another debt service payment, as management now believe that the property is worth “meaningfully below" the principal amount of the debt.

While there have been many hotel defaults in recent months, this is a high-profile transaction, involving a publicly held hotel REIT and a premium hotel brand. The W hotel brand is owned by Starwood Hotels & Resorts (HOT), which also manages the W San Diego property. There are currently only 29 W hotels worldwide, although the company has an additional 22 W hotels in its pipeline.

As the hotel operating environment remains weak, we expect that more hotel owners will come to the conclusion that they would be better off walking away from properties that are now worth less than their outstanding debt balances. This would in turn put additional pressure on hotel values, just as a residential foreclosure or short sale negatively impacts all the houses in the vicinity.

We continue to believe that hotel stocks are due for a correction. We maintain our Sell rating on shares of Starwood and Marriott (MAR), and maintain our negative outlook on the sector.
Read the full analyst report on "SHO"
Read the full analyst report on "HOT"
Read the full analyst report on "MAR"
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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About Zacks

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

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 Bull and Bear of the Day Highlights: Marvel Entertainment, Starwood Hotels & Resorts, Wal-Mart, Family Dollar and Saks – Press Releases

Zacks Market Commentaries — Thu, 28 May 2009 12:41:22 +0000

For Immediate Release

Chicago, IL - May 28, 2009 - Zacks Equity Research highlights Marvel Entertainment (MVL) as the Bull of the Day and Starwood Hotels & Resorts (HOT) the Bear of the Day. In addition, Zacks Equity Research provides analysis on Wal-Mart (WMT), Family Dollar (FDO) and Saks (SKS).

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:

Marvel Entertainment's (MVL) business model of leveraging its library of more than 5,000 trademarked and often ubiquitous characters across 3 businesses comic books, toys and films while putting little capital at risk has proven lucrative, generating operating margins and ROE averaging 56% and 37%, respectively, from 2003 to the present. We expect EPS to fall by nearly 50% in 2009, but recover in 2010 to eclipse 2008 levels, driven by the timing of the company's film slate.

The newly-launched film production unit has performed very well thus far, producing two high grossing films in 2008. One-to-two films a year are planned for 2010 and beyond, which we think can contribute to high-teens average EPS growth over the long-term.

In the meantime, MVL appears relatively resilient to the recession, with single digit revenue declines expected in 2009 in the licensing division impressive during a recession and in a year with no film openings -- while the film segment's earnings will hinge more on the popularity of its releases than on the economy, as movies are inexpensive entertainment.

Bear of the Day:

We are downgrading our rating on shares of Starwood Hotels & Resorts (HOT) from Hold to Sell. We continue to believe that Starwood's well-positioned portfolio will benefit given an increase in demand.

However, we currently do not expect an improvement in the operating environment in the near term. Although demand situation continues to deteriorate considerably, the share price has more than doubled off of its lows reached in early March.

We consider the magnitude of this move to be unwarranted. Our price target of $16.50 reflects a multiple of 9.0x our 2009 EBITDA estimate, and 20.0x our 2009 EPS estimate.

Latest Posts on the Zacks Analyst Blog:

Existing Homes Sales Up, But So Are Inventories

I do not see this report as particularly good news nor particularly horrific news. Those expecting housing to come roaring back and lead this economy back to health are likely to be sorely disappointed. On the other hand, the signs of stabilization mean that housing is not going to drive the country into oblivion, either.

The very high level of supply (including lots of shadow inventory of people who would like to sell, but want to wait for a stronger market, and the still very full foreclosure pipeline) means that housing prices will continue to be under pressure for a while. While prices relative to rents and incomes have returned to more rational levels, there is nothing to stop prices from going past "fair value" on the downside. Certainly there is no reason to expect that the trillions of dollars in housing equity that has been lost over the past few years will come back anytime soon (perhaps not for a decade or more).

Even though consumer confidence is up, I would still be cautious about investing in the Consumer Discretionary area. With the need to replenish their savings (housing equity was a huge part of most peoples "savings") for retirement and college funds, people will not be spending freely for a long time. The likely beneficiaries of this would be sellers of "inferior goods." In retail that means that stores like Wal-Mart (WMT) and Family Dollar (FDO) will outperform stores like Saks (SKS).

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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.

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About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks InvestmentResearch is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=4582.

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Contact:
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312-265-9380
Visit: www.zacks.com

Zacks Investment Research

Starwood Hotels & Resorts (HOT) – Bear of the Day

Zacks Market Commentaries — Thu, 28 May 2009 05:00:00 +0000

We are downgrading our rating on shares of Starwood Hotels & Resorts (HOT) from Hold to Sell. We continue to believe that Starwood's well-positioned portfolio will benefit given an increase in demand.

We consider the magnitude of this move to be unwarranted. Our price target of $16.50 reflects a multiple of 9.0x our 2009 EBITDA estimate, and 20.0x our 2009 EPS estimate.Zacks Investment Research

Starwood Downgraded to a Sell – Analyst Blog

Zacks Market Commentaries — Wed, 27 May 2009 16:44:59 +0000

Highlights include Starwood Hotels & Resorts Worldwide, Inc. (HOT), Marriott International, Inc. (MAR) and Intercontinental Hotels Group Plc (IHG).

We are downgrading our rating on shares of Starwood Hotels & Resorts (HOT) from Hold to Sell.

The shares have climbed more than 135% since hitting lows in early March. In light of the current state of industry fundamentals, we consider the magnitude of this move to be unwarranted, and recommend that investors use the move as a selling opportunity.

The hotel industry is in the midst of a deeply challenging downturn, with 2009 average weekly revenue per available room, or RevPAR, down nearly 20% year-over-year. Although Starwood, like industry peers Marriott (MAR) and Intercontinental Hotels Group (IHG), has taken steps to significantly reduce expenses, the reductions will not be sufficient to offset the large declines in revenue.

Starwood management expects RevPAR at worldwide same-store company-operated hotels to decline 18% in 2009. Additionally, the company anticipates that RevPAR will decline 21% at worldwide branded same-store owned hotels during 2009.

Adding to these concerns, in our opinion, is the fact that the industry as a whole appears to be cutting room rates in an attempt to increase occupancy. We believe that this strategy could both increase the severity and length of the industry downturn, as we recently noted.

Although we believe that Starwood is well positioned for the long-term, we expect that operating conditions will weaken further before improving. We project declining revenues and earnings for Starwood over the next two years, as the company feels the impact of the lingering downturn.

Shares of HOT are currently trading at 10.7x our 2009 EBITDA estimate and 28.5x our 2009 EPS estimate. Given the current state of fundamentals in the industry, we consider these multiples to be excessive.

Our price target of $16.50 reflects a multiple of 9.0x our 2009 EBITDA estimate, and 20.0x our 2009 EPS estimate.
Read the full analyst report on "HOT"
Read the full analyst report on "MAR"
Zacks Investment Research

Hotels: Deterioration Continues – Analyst Blog

Zacks Market Commentaries — Fri, 15 May 2009 21:57:07 +0000

We highlight Marriott International, Inc. (MAR), Starwood Hotels & Resorts Worldwide, Inc. (HOT) and Intercontinental Hotels Group Plc (IHG).

The ongoing recession continues to take its toll on the lodging industry, with weekly operating metrics consistently posting substantial year-over-year declines.

According to data from Smith Travel Research, Inc., occupancy has fallen 12.1% year-over-year in the second quarter to date, while average daily room rate, or ADR, has fallen 9.4% versus the year-ago period. Together, this has resulted in revenue per available room, or RevPAR, falling 20.3% thus far in the second quarter.

We note that this represents a decline from the first quarter of the year, when RevPAR was down 19.0% year-over-year.

The chart below presents the weekly year-over-year changes in U.S. RevPAR during 2009. Although we expect that the year-over-year comparisons will begin to ease later this year -- due to weak performance in the latter half of 2008 -- the trend thus far has been steady declines in top-line revenue versus the year-ago periods.

Importantly, declines in ADR have accelerated in the second quarter, down 9.4% thus far, versus a decline of 7.4% in the first quarter. This trend seems poised to continue, as Marriott (MAR) announced today that it is offering 20% off weekend room rates at more than 2,500 hotels worldwide.

The deterioration in room rates is a troubling sign, in our opinion.

We believe that it is generally a mistake for hotel operators to cut room rates in an attempt to drive occupancy higher. Changes in room rates fall to the bottom line at a much higher percentage than do changes in occupancy. Additionally, when the economy does eventually stabilize, hotel operators may find it more difficult to raise rates back to historical levels, thus prolonging the problems faced by the industry.

The road ahead clearly remains extremely challenging for the large hotel companies, including Marriott, Starwood (HOT) and Intercontinental Hotels Group (IHG). With no clear sign on the horizon that operating fundamentals in the hotel industry will improve in the near future, we maintain our negative outlook on the group.
Read the full analyst report on "MAR"
Read the full analyst report on "HOT"
Zacks Investment Research

The Most Contrarian Idea I Have

Daniel Hung — Thu, 07 May 2009 05:26:51 +0000

Any reader of my blog recognizes that I generally have an affinity for consumer products and retail facing stocks. In this recession, I’ve also become quite the fan of dividends as manifested in my recent investments - GE, VLO, MO, and LINE. As such, this investment idea probably comes as no surprise - Hotel REITS. What [...]

Swine Flu Affects Travel Stocks – Analyst Blog

Zacks Market Commentaries — Mon, 27 Apr 2009 18:59:30 +0000

Highlights include Carnival Corp. (CCL/CUK), Royal Caribbean Cruises, Ltd. (RCL), Marriott International, Inc. (MAR) and Starwood Hotels & Resorts Worldwide, Inc.(HOT).

Travel Stocks Down on Swine Flu Concerns

Swine Flu concerns have driven travel industry stocks lower today, as the Street fears this recent development will only add to the challenges already facing the sector.

These fears were amplified today when the European Union's health commissioner warned that Europeans "should avoid traveling to Mexico or the United States of America unless it is very urgent for them."

The Centers for Disease Control and Prevention in Atlanta has stated that this proclamation was unwarranted, as there have only been 20 cases confirmed in the United States, only one of which even required hospitalization.

With travel demand already at extremely weak levels, any additional adversity could make the operating environment in the travel industry even more challenging.

We would expect concerns over the Swine Flue outbreak to impact the cruise line stocks, including Carnival (CCL/CUK) and Royal Caribbean (RCL) -- more than those of the hotel companies. With their close quarters and itineraries that include ports in Mexico, we expect that the perceived risk among travelers would be highest in this sector.

While the direct risk to hotel companies such as Marriott (MAR) and Starwood (HOT) is lower, in our opinion, the operating environment in the hotel industry is already so weak that any additional deterioration in demand could delay the eventual stabilization of the industry.

We believe that it is important to note that information regarding this outbreak of swine flu is in its very early stages. As more details become known, the impact on the travel industry could change substantially. In the near-term, however, the news simply adds new problems to an industry that was already struggling with the impact of the global economic recession. This development does nothing to improve that picture.

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

Marriott Rally Unwarranted – Analyst Blog

Zacks Market Commentaries — Thu, 23 Apr 2009 22:30:24 +0000

We highlight Marriott International, Inc. (MAR) and Starwood Hotels & Resorts Worldwide, Inc. (HOT).

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.

Despite these results, we have tempered our expectations for the remainder of the year, and have lowered our full-year earnings estimate.

The company expects that revenue per available room, or RevPAR, at North American system-wide hotels will decline between 17% and 20% in 2009, while RevPAR is expected to decline between 13% and 16% at system-wide hotels outside North America this year. While the company has taken steps to reduce expenses and maintain margins as much as possible, RevPAR declines of this magnitude have a significant impact on the ability of the company to generate improved returns.

The operating environment in the lodging sector has changed substantially in recent months, and the large lodging companies like Marriott and Starwood (HOT) are being impacted in every market segment.

We expect RevPAR to continue to decline in the near term, and we expect that conditions will remain challenging throughout 2009. Additionally, the company's timeshare segment is experiencing weakness, with sales down considerably.

Although we believe that Marriott is well positioned for the long-term, we expect that operating conditions will weaken further before improving.

Given our forecast for meaningfully lower earnings per share 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 recommend avoiding the shares at this time.
Read the full analyst report on "MAR"
Read the full analyst report on "HOT"
Zacks Investment Research

Zacks Analyst Blog Highlights: Starwood Hotels & Resorts Worldwide, Blackstone Group, Marriott, Polycom, Inc. and Petrobras. – Press Releases

Zacks Market Commentaries — Mon, 20 Apr 2009 11:43:34 +0000

For Immediate Release

Chicago, IL - April 20, 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 & Resorts Worldwide (HOT), Blackstone Group (BX), Marriott (MAR), Polycom, Inc. (PLCM) and Petrobras (PBR).

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 Friday's Analyst Blog:

Hilton Sued for Corp. Espionage

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.

The hotel industry is in the midst of an extremely challenging operating environment. Operating metrics continue to deteriorate, and competition among the large companies in the industry, including Starwood, Hilton, and Marriott (MAR) is fierce.

Polycom's Two-Edged Sword

On the one hand, Polycom, Inc. (PLCM), a leading provider of voice/video conferencing solutions, should be expected to benefit from tigher travel budgets at business enterprises worldwide. However, the company has also been exposed to the effects of the economic conundrum that is forcing restricted IT and computer equipment spending.

The company recently reported mixed financial results for the first quarter 2009. Total revenue was $225.4 million, down 13% year-over-year and down 14.3% sequentially. Net income on a GAAP basis was $8 million, or an income of $0.10 per diluted share, compared to a net income of $14.2 million or an income of $0.16 per diluted share in the same quarter of the previous year.

Petrobras Findings "Political"

In the last two weeks, Petrobras (PBR) announced two new finds. The first was actually announced by BG Group, which forms a consortium with Petrobras (40% BG - operator, 60% Petrobras), regarding the Corcovado-1 well in the pre-salt layer, which showed some evidences of oil at a depth of only 800 meters.

The second announcement was made by Petrobras itself concerning the Guara and the Carioca wells, which belong to a consortium formed by Petrobras (45% - operator), BG Group (30%) and Repsol (REP) (25%). The company found light oil at a depth of 4,900 meters.

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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.

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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

Hotels: Worst Week Yet – Analyst Blog

Zacks Market Commentaries — Fri, 17 Apr 2009 14:53:05 +0000

Highlights include Marriott International, Inc. (MAR), Starwood Hotels & Resorts Worldwide, Inc. (HOT) and Intercontinental Hotels Group (IHG).

The hotel industry posted its work week of 2009 last week, as the recession continues to take its toll.

According to data from Smith Travel Research, Inc., the week ended April 11 was the worst of the year to date, with each primary operating metric posting its largest decline thus far.

Occupancy fell 17.9% year-over-year, while average daily room rate, or ADR, fell 12.5% versus the year-ago period. Together, this resulting in revenue per available room, or RevPAR, falling 28.1% compared to the prior-year period.

These weekly declines substantially exceed the previous 2009 weekly average declines of 12.3% in occupancy, 7.5% in ADR, and 18.9% in RevPAR.

The fact that both occupancy and ADR posted their worst declines of the year last week is a troubling sign, in our opinion. We believe that it is generally a mistake for hotel operators to cut room rates in an attempt to drive occupancy higher. When those reductions in room rate fail to stem falling occupancy, however, the negative impact on the bottom line is amplified even further.

Higher-end hotels fared worst last week, with occupancy at upscale chains down 22.0%. At upper-upscale chains, ADR was down 18.0% and RevPAR was down 35.9%, representing the largest declines in each metric.

The road ahead clearly remains extremely challenging for the large hotel companies, including Marriott (MAR), Starwood (HOT), and Intercontinental Hotels Group (IHG).

Some macroeconomic signs have pointed towards a potential stabilization of the economy. However, we see no clear sign on the horizon that operating fundamentals in the hotel industry will improve in the near future.

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

Benefiting from an Open Cuba – Analyst Blog

Zacks Market Commentaries — Tue, 14 Apr 2009 17:49:15 +0000

Highlights include Carnival Corp. (CCL), Royal Caribbean Cruises, Inc. (RCL), Marriott International, Inc. (MAR) and Starwood Hotels & Resorts Worldwide, Inc. (HOT).

Cuba may offer new growth potential for some travel and leisure firms, if recent steps taken by the U.S. government are sign of things to come.

Yesterday, the Obama administration announced that Cuban-Americans will now be allowed to visit the island nation without restriction, and will be allowed to send remittances to family members in Cuba.

The lifting of previous restrictions has sparked speculation among investors that further changes may be forthcoming. While the trade embargo currently remains in effect, if relations with Cuba were to be normalized in the future, several U.S. companies could stand to benefit.

The major cruise lines, Carnival Corp. (CCL) and Royal Caribbean (RCL) would likely stand out as winners, as the companies could add a very attractive destination to their Caribbean cruise itineraries.

Major hotel companies such as Marriott International (MAR) and Starwood (HOT) would also benefit from the potential expansion opportunities in Cuba.

Prior to the revolution led by Fidel Castro, Cuba was a popular tourist destination, filled with large hotels and casinos. Its convenient location just 90 miles off thevcoast of Key West, Florida made it a hot spot for U.S. tourists.

Given the fact that regular travel to the island nation has been prohibited for decades under the trade embargo, we expect that Cuba would prove to be an extremely popular destination for American tourists, and could provide substantial benefits to the travel and leisure companies.

We note, however, the step from the changes announced yesterday to a full normalization of relations with Cuba is a large one, and to invest in a company solely for this potential would be a mistake, in our opinion.

The outlook remains very challenging for travel companies in this economic environment, and we remain cautious on the group as a whole.
Read the full analyst report on "CCL"
Read the full analyst report on "RCL"
Read the full analyst report on "MAR"
Read the full analyst report on "HOT"
Zacks Investment Research

Reviewing Weekly Hotel Stats – Analyst Blog

Zacks Market Commentaries — Thu, 09 Apr 2009 22:17:30 +0000

Highlights include Marriott International, Inc. (MAR), Starwood Hotels & Resorts Worldwide, Inc. (HOT) and Intercontinental Hotels Group Plc (IHG).

The hotel industry continues to be hit hard by the recession, as both business and leisure travelers cut back on expenditures.

Smith Travel Research, Inc. released weekly hotel operating statistics today, and the weak year-over-year results continue. For the week ended April 4, occupancy fell 9.9% year-over-year to 56.2%, average daily room rate, or ADR, fell 9.0% to $98.79, and revenue per available room, or RevPAR, fell 18.0% to $55.49.

Large metro areas were hit especially hard last week, with Chicago and New York City leading the ADR decliners by falling 24.0% and 24.9%, respectively. Chicago had the largest occupancy decline in the top 25 markets, and led the way in the RevPAR category as well, with a year-over-year decline of 40.7%.

Among the top 25 markets, only Detroit, Michigan posted increases in both ADR, up 12.0%, and RevPAR, up 8.3, during the week. As we highlighted in a previous post, the city benefited from the run-up to the Final Four, which was held in Detroit over the weekend. Even so, the city still posted a year-over-year decline in occupancy during the period. We expect that the city will post even better operating numbers this week.

Our close watch on room rates continues, and the fact that the industry has avoided double-digit percentage declines in ADR in every week but one in 2009 is a somewhat encouraging sign. However, the general trend has been towards increased deterioration in rates, and we await the strategies that hotel owners and operators will undertake as the weather begins to warm up.

If the large hotel companies, including Marriott International (MAR), Starwood Hotels & Resorts Worldwide (HOT) and Intercontinental Hotels Group (IHG), can reasonably maintain room rates until demand begins to pick up, the industry will likely emerge from this down cycle substantially quicker than if companies begin sacrificing room rates in an attempt to boost occupancy.

With no clear sign on the horizon that operating fundamentals will improve in the near future, we maintain our negative outlook for the sector.
Read the full analyst report on "MAR"
Read the full analyst report on "HOT"
Zacks Investment Research

Hotel Statistics Still Grim – Analyst Blog

Zacks Market Commentaries — Thu, 02 Apr 2009 19:49:11 +0000

Highlights include Marriott International Inc. (MAR), Starwood Hotels & Resorts Worldwide, Inc. (HOT) and Intercontinental Hotels Group plc (IHG).

Smith Travel Research released weekly hotel operating statistics today, and the news remains grim. For the week ended March 28, occupancy fell 12.3% year-over-year to 56.6%, average daily room rate, or ADR, fell 8.8% to $99.77, and revenue per available room, or RevPAR, fell 20.0% to $56.50.

Looking inside the numbers, New York City posted the largest decrease in ADR, down 28.2%, and RevPAR, down 39.6%. As the city with by far the highest room rates in the country, this decline is not particularly surprising. However, NYC remains the most important hotel market in the country, and its ability to rebound once the economy improves will have a significant impact on the lodging sector.

Six markets posted weekly RevPAR declines of more than 25%:

Market Weekly RevPAR Change

New York, NY -39.6%
Orlando, FL -35.4%
Oahu Island, HI -26.8%
Miami, FL -26.8%
Minneapolis / St. Paul, MN -26.3%
Boston, MA -25.9%

We note that the list above is comprised of leisure destinations (Orlando, Oahu), business destinations (Minneapolis/St. Paul, Boston), and markets that are a mix of the two (New York City). Both consumers and business are scaling back travel expenditures amid the economic recession, and hotel companies continue to feel the impact.

RevPAR was down in all chain-scale segments, from Luxury down to Economy, as every area of the industry deals with the current lack of demand.

Lower-tier hotels, including Economy and Midscale brands, posted the largest declines in occupancy. Luxury brands posted the largest declines in ADR and RevPAR, as these hotels seek to cut prices to keep customers from trading down to cheaper brands.

Clearly, the operating environment for hotel companies, including Marriott (MAR), Starwood (HOT) and Intercontinental Hotels Group (IHG), remains exceedingly challenging, with no sign of improvement in the near future.
Read the full analyst report on "MAR"
Read the full analyst report on "HOT"
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

Challenges Ahead for Hotels – Analyst Blog

Zacks Market Commentaries — Fri, 27 Mar 2009 19:00:46 +0000

Highlights include Marriott International Inc. (MAR), Starwood Hotels & Resorts Inc. (HOT) and Intercontinental Hotels Group plc ADR (IHG).

Challenges & Opportunities for Hotels

The hotel industry posted its best week of 2009 last week, with revenue per available room, or RevPAR, down "only" 12.3% versus the year-ago period. Looking behind the numbers, however, we find signs that could lead to more difficult challenges ahead for companies such as Marriott International (MAR), Starwood Hotels & Resorts (HOT) and Intercontinental Hotels Group (IHG).

According to data released Thursday from Smith Travel Research, the RevPAR decline of 12.3% during the week ended March 21 was comprised of a 4.7% decline in occupancy, and an 8.0% decline in average daily room rate (ADR).

Weekly RevPAR declines have been running in a range of approximately 15% to 25% to date this year. While the relative improvement in RevPAR decline is modestly encouraging, the makeup of the improvement is potentially concerning.

To this point in the year, the majority of RevPAR declines have been comprised of declines in occupancy, as hotel companies had focused on maintaining room rates as much as possible. This was the first week of the year that the decline in room rates exceeded that of the decline in occupancy.

While RevPAR is a critical operating metric in the industry, its composition can be just as important.

And while gains in occupancy are obviously important, for every room that is filled there are additional expenses such as housekeeping, laundry and utilities that must be paid. Changes in room rates, however, have the greater impact on profitability, and fall almost entirely to the bottom line.

One week does not a trend make, but if we were to see the hotel companies make additional cuts to room rates in an effort to boost occupancy, it would likely indicate that the industry will take longer to rebound once the economy stabilizes. If, however, the hotel owners can hold room rates steady without sacrificing occupancy, we would become more optimistic about the 2nd half of the year.

We will continue to monitor the weekly operating metrics and make the appropriate adjustments to our outlook for the industry. We currently maintain our Sell rating on shares of MAR, and our Hold rating on shares of HOT.
Read the full analyst report on "MAR"
Read the full analyst report on "HOT"
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

Baby Boomers Going Bust – Analyst Blog

Dirk Van Dijk — Thu, 12 Mar 2009 18:57:44 +0000

Highlights include Starwood Hotels & Resorts Worldwide, Inc. (HOT), Marriott International, Inc. (MAR), Winnebago Industries, Inc. (WGO), The Procter & Gamble Company (PG) and Del Monte Foods Co. (DLM).

One of the most disturbing things about the housing bubble and its subsequent bursting -- and the resulting financial crisis -- has been the effect it has had on the wealth of the middle class, particularly those who are approaching retirement.

Rising asset values, both in equities and real estate, lead people to save less than they might ordinarily have in the absence of a bubble. While this "extra" disposable income was certainly a boost to the economy on the way up, it is going to have devastating long-term consequences.

Quite simply, most of the largest generation of Americans ever will not be able to retire. The only assets that are not considered are the value of defined benefit pension plans, which in any case have become quite rare in recent years. While I have been writing about this in general terms for a while now, a recent paper available here: http://www.cepr.net/documents/publications/baby-boomer-wealth-2009-02.pdf puts some actual numbers on the problem.

The graph below shows the net worth of people aged 45 to 54 versus where they were in 2004 (when they were aged 40 to 50). It projects their net worth at the end of the year under 3 different scenarios for housing prices, and assumes that the S&P 500 stages a very nice rebound from where it is today (but flat from when they were writing the paper) by the end of the year, finishing at 823. Frankly, I find the "worst case scenario" to be a bit on the optimistic side on housing prices, but well within the realm of reason. The other 2 scenarios are really not worth considering too seriously, so look at the purple bars and ignore the yellow and green ones.

The study finds that people in the lowest 20% actually owe more than they own today. In effect, they are underwater on their homes, have nothing in the bank, no 401(k) and no IRA, and are carrying a credit card balance. These people are, in a word, "screwed."

However, even the people in the middle are in very bad shape. The median net worth of households headed by someone in this age cohort is just $94,200 vs. $172,400 5 years ago. So during 5 years of what should be the prime wealth-accumulation time of life, their wealth has plunged by 46%, and that is under the most optimistic of the 3 scenarios.

Well, at least these folks have between 10 and 20 years to rebuild their savings before reaching normal retirement age. For the older baby boomers, time is running out. Under the optimistic scenario, their median net worth is down to $159,800 from $315,400 in 2004. That is not going to last very long in anything like a comfortable retirement.

The report also shows the very large concentration of wealth, with the top quintile simply towering over all the rest. However, while all wealth levels have been affected, the top is clearly the largest in absolute dollar terms, but on a percentage basis much less. This is because the lower quintiles tend to hold a greater percentage of their wealth in the form of housing equity, and that tends to be highly leveraged.

Housing prices still have room to fall, and they are not going to be coming back anytime soon in real terms. Many of the boomers are going to be stuck in their houses, unable to bring cash to the closing that would be required. Unless they simply walk away, or are foreclosed upon, this may slow down the elderly migration to places like Florida.

This points to very serious long-term problems for the economy and should cause any recovery to be extremely anemic. The Baby Boomers are going to have to dramatically raise their savings rates. The older boomers -- those on the verge of retirement -- are not going to be doing the things that we currently associate with retirees. They are not going to be traveling as much, which will hurt the long-term prospects of the hotel companies like Starwood (HOT) and Marriott (MAR). They will not be buying RV's from Winnebago (WGO).

This might, on the other hand, be good for pet food companies, because it looks like they are going to be booming (but not for feeding Fido). Unfortunately, there are no good pure-play pet food companies out there; most of the major brands are part of much larger firms like Procter & Gamble (PG). Del Monte (DLM) is probably about as close to a pure play on the pet food market that is available.

I would strongly suggest that people follow the link and read this paper.

Read the full analyst report on "PG"
Read the full analyst report on "MAR"
Read the full analyst report on "HOT"
Read the full analyst report on "DLM"
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

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

U.S. Economy in 2009, Pain Will Precede the Promise

Shah Gilani — Mon, 29 Dec 2008 15:15:51 +0000

pIf there’s a proverb that captures the outlook for the U.S. economy in the New Year, it’s the one that says: “It’s always darkest before the dawn.”/p pRegardless of any formal announcement of whether or not the United States drops into an actual recession, the ongoing credit crisis guarantees a contraction of the American economy by virtually every measure we know. That period of darkness will be marked by a dramatic slowdown in economic activity, as well as by rising unemployment, additional declines in U.S. stock prices, and constant volatility. It could last as long as 12-18 months./p pBut when the dawn does come, it will be one to remember. If U.S. President-elect Barack Obama gets it right - and I have#8230;/p

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?
Zacks Investment Research

U.S. Economic Outlook for 2009

Shah Gilani — Mon, 24 Nov 2008 12:51:04 +0000

pIf there’s a proverb that captures the outlook for the U.S. economy in the New Year, it’s the one that says: #8220;It’s always darkest before the dawn.#8221;/p pRegardless of any formal announcement of whether or not the United States drops into an actual recession, the ongoing credit crisis guarantees a contraction of the American economy by virtually every measure we know. That period of darkness will be marked by a dramatic slowdown in economic activity, as well as by rising unemployment, additional declines in U.S. stock prices, and constant volatility. a href="http://www.oxfonline.com/MMR/MMR0708deck.html?pub=MMR#38;code=WMMRJB05"And it could last as long as 12-18 months./a/p pBut when the dawn does come, it will be one to remember. If U.S. President-elect Barack Obama gets it right - and I#8230;/p

For the U.S. Economy in the New Year, the Pain Will Precede the Promise

Shah Gilani — Mon, 10 Nov 2008 06:00:06 +0000

[Editor’s Note: This is the second installment of a new series that looks at the global investing outlook for 2009.] By Shah Gilani Contributing Editor Money Morning/The Money Map... Money Morning is here to help investors profit handso...

Starwood Hotels Remains a Buy – Analyst Blog

Zacks Market Commentaries — Mon, 20 Oct 2008 14:47:45 +0000

We maintain our Buy rating for Starwood Hotels (HOT). We consider the company's significant exposure to international markets and concentration in higher-end hotels to be positive attributes that should help Starwood to weather the economic downturn in the U.S. market.

Even in the weakening hotel operating environment, we believe that the recent pullback has been overdone, and we consider shares of Starwood Hotels to be attractive at the current level. Our price target of $35.50 per share reflects an enterprise value/EBITDA multiple of 8x our 2009 EBITDA estimate.

Starwood derives the majority of its revenue from its full-service, luxury/upscale brands, including Sheraton, Westin, St. Regis, The Luxury Collection, W, Four Points by Sheraton, and Le Meridien. The majority of the company-owned properties are operated under the Sheraton and Westin brands and located in major North American markets.

Read the full analyst report on HOT

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

Brenda Barnes – Sara Lee (SLE)

QualityStocks — Tue, 08 Jul 2008 18:44:03 +0000

At 53, Brenda Barnes is back and in full swing. Ten years ago, her 1997 resignation as Head of Pepsicoâ€™s North American Beverage business to spend more time with her family caused a huge debate at the time for women in business. Many felt Brenda had let down their gender by opting out of the [...]

Starwood Hotels…takeover bid starts at $90

Agustin Gonzalez — Fri, 06 Jul 2007 19:56:18 +0000

Today, shares of Hilton Hotel (HLT) soared 26% after word broke that the company agreed to be bought by the Blackstone Group for $20.1 billion in cash. The deal is valued at $26 billion including debt. This proposed acquisition represents a 32% premium over Tuesday’s closing price. With this transaction setting a [...]