For Immediate Release
Chicago, IL – June 18, 2012 – Zacks Equity Research highlights Everest Re Group (RE) as the Bull of the Day and Deckers Outdoor (DECK) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Starwood Hotels & Resorts Worldwide Inc. (HOT), Host Hotels & Resorts Inc. (HST) and Marriott International Inc. (MAR).
Full analysis of all these stocks is available at http://at.zacks.com/?id=2678.
Here is a synopsis of all five stocks:
We are upgrading our recommendation on the shares of Everest Re Group's (RE) following the first quarter's better-than-expected results. The company also posted a net profit as opposed to a net loss in last year's quarter. The increased earnings resulted from lower claims expenses and increased revenue.
We remain optimistic about management's expectations of favorable reinsurance market pricing led by the last year's cat loss events. Any such development augurs well for the company, which is a big player in the reinsurance market. The company is also aggressively expanding its overseas business, thereby contributing significantly to the overall top line in recent years.
Moreover, given its conservative financial leverage measures, the company maintains strong financial flexibility with the ability to effectively manage its capital mid-market cycles. Our six-month target price of $122.00 equates to 10.5x our earnings estimate for 2012. With an annual dividend of $1.92 per share, this price target implies an expected total return of 20.5% over that period.
Deckers Outdoor's (DECK) first-quarter 2012 earnings of $0.20 per share missed the Zacks Consensus Estimate of $0.25, and fell over 50% from the prior-year quarter as the unfavorable weather conditions adversely impacted the sales of UGG boots. Rise in sheepskin prices and increased operating expenses also hurt the bottom line. Consequently, management lowered its fiscal 2012 outlook.
Management now projects earnings to decline between 9% and 10%. Earlier, the company had forecasted earnings to remain flat. Deckers now expects total revenue growth of 14%, down from 15% forecasted earlier. The company also forecasts a gross profit margin contraction of 250 basis points due to increase in costs of goods sold and higher closeout sales level.
For the second quarter of 2012, management now anticipates 8% growth in total revenue and a loss per share of $0.60. Further, over-reliance on the UGG brand, intense competition and sluggish economic recovery remain matters of concern. Consequently, we have downgraded our recommendation on Deckers to Underperform.
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Starwood to Overhaul W
Starwood Hotels & Resorts Worldwide Inc. (HOT) announced that more than 10 North American properties of one of its high-end brands, W, will undergo extensive makeover in the coming 18 months. The renovation will cost more than $100 million. Starwood will carry out the project in association with its several ownership groups, including Host Hotels & Resorts Inc. (HST), Rockpoint Group and Estein & Associates USA.
Starwood remains on track to spread its W operations globally through more than 50 hotels by the end of 2013. The brand was launched in 1998, in New York. The W brand has a high growth trajectory and is already present in every region including North America, Europe, Latin America, Asia-Pacific, the Middle East and Africa.
The brand has been on an uphill ride in terms of revenue generation, reflecting its strength and growing popularity. In the first quarter of 2012, RevPAR growth at W was 8.5% or 8.8% in constant dollars, second highest among all the other Starwood brands.
Starwood mainly considered older properties operating in dynamic markets like New York City, Seattle, Chicago, New Orleans and Los Angeles as ideal candidates for upgradation in order to maintain consistency with the newer ones. Apart from renovation, these properties will also unveil some bar and restaurant concepts to attract neighboring guests.
Since late 2010, hotel companies are working hard on guest satisfaction to uplift their positions in a cutthroat environment. Brand conversion and remodeling became the trend. Following the facelift trend, in March 2011, Starwood embarked on a two-phase $150 million remodeling program for The Sheraton, New York, one of the largest hotels in New York City. Apart from refurbishment, Starwood also focuses on brand conversion via remodeling.
Renovation work, however, hurts revenue in the near term when construction is on. Starwood’s management commented that extensive renovation at various properties lessened its owned EBITDA by approximately $5 million in the first quarter of 2012 and it expects a similar impact in the second quarter as well. But after the overhaul work, existing properties pay off more.
Many of Starwood’s peers like Marriott International Inc. (MAR) are also walking the same path. Starwood currently retains a Zacks #2 Rank, which translates into a short-term Buy rating. We are also maintaining our long-term Neutral recommendation on the stock.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.
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