Zacks_Analysts' Blog : Starwood to Outperform Ahead - Analyst Blog

We have an Outperform recommendation on Starwood Hotels & Resorts Worldwide Inc. (HOT) based on its strong expansion plan, significant international exposure, portfolio restructuring, earnings power as well as returns to shareholders.   

Based in White Plains, New York, Starwood has embarked on an expansion plan, which is faster than many of its peers. Also, the solid brand recognition of the company allows it to charge a premium for its hotel rooms. With the average daily rate picking up and strong rebound in group business, the company expects room rate to drive 50% or more RevPAR growth in fiscal 2011.

Geographically, the business is sound in each segment. Although the austerity measures and fragile economic conditions affected demand in Europe, Starwood managed to register a 7% RevPar growth in Europe in the third quarter of 2011. The company further expects RevPar growth of 3% to 4% in Europe for the fourth quarter, the prevailing economic turmoil notwithstanding.

Starwood remains keen on portfolio restructuring both in terms of asset disposition as well as revamping its existing assets. While due to sluggish acquisition environment Starwood has no property to offload in the near term, Starwood plans to deploy its capital to renovate its owned assets and prepare them as lucrative acquisition targets in a stable environment.

Starwood has increased its guidance for 2011 more than once, implying secured business fundamentals. Moreover, the recent dividend hike of 67% to 50 cents per share and reinstatement of a share repurchase program long after the third quarter of fiscal 2008 spread cheer among investors.

Agreement - Estimate Revisions

Over the last 7 days, one out of 19 analysts raised the earnings estimate for the fourth quarter as well as fiscal 2011.

The company’s competitors include Marriot International Inc. (MAR) and Wyndham Worldwide Corp. (WYN). Starwood currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.