On Feb 22, we upgraded our recommendation on
Starwood Hotels & Resorts Worldwide Inc.
) to Outperform based on better-than-expected fourth-quarter 2012
Why the Upgrade?
Starwood's fourth-quarter 2012 earnings and revenues
comprehensively surpassed the Zacks Consensus Estimate. Revenue
per available room (RevPAR) in all regions registered a modest
rise in the quarter. Improving trends in the North American
business, significant international exposure and portfolio
restructuring should also augur well for Starwood.
Owing to a gradual economic recovery, system-wide occupancies
at Starwood hotels in North America appear to be pretty steady
and above the prior peak level in 2006. Starwood opened 23 hotels
in North America in 2012 and signed several new deals, much more
than it had done in the past couple of years. Starwood expects
2013 to be its strongest year in terms of hotel openings in North
America since the recession.
The hotelier is also poised to tap the reviving economic
condition in the emerging markets. More than half of the hotel's
properties are situated outside the U.S., which gives the company
wide international exposure, unlike many of its peers. Markets
within Asia-Pacific and Latin America promise immense growth
potential with visits expected to increase substantially going
Asset disposition remains another bright spot for the company.
This strategy paves the way for the company to attain higher
financial flexibility. In a cutthroat competitive environment,
Starwood is also deploying its capital to renovate its assets as
lucrative leisure destinations.
CHOICE HTL INTL (CHH): Free Stock Analysis
STARWOOD HOTELS (HOT): Free Stock Analysis
INTERCONTL HTLS (IHG): Free Stock Analysis
WYNDHAM WORLDWD (WYN): Free Stock Analysis
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Management also expects accelerated growth in the Chinese market
post Government transition and fewer concerns in Europe in 2013
to aid the company's earnings. Moreover, share repurchase
activity and dividend distribution are the other positives.
Other Stocks to Consider
Other players in the hotels sector that are currently performing
Choice Hotel International Inc.
Wyndham Worldwide Corp.
Intercontinental Hotels Group plc
). All these companies carry a Zacks Rank #2 (Buy).