Wachovia Downgrades Starwood Hotels (HOT) to Market Perform

June 30, 2009 7:36 AM EDT
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Price: $77.05 --0%

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    10 Buy, 19 Hold, 1 Sell

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    Up: 10 | Down: 32 | New: 9
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Wachovia downgrades Starwood Hotels (NYSE: HOT) to Market Perform.

Wachovia analyst says, "Our revised investment rating on Starwood Hotels & Resorts (HOT) is the result of a few factors: (1) Q2 2009 margin deterioration remains a particular concern given the tougher RevPAR outlook and Starwood’s marked declines in Q1 2009; we feel the opportunity for disappointment is ‘high’; (2) Core segments (luxury, upper upscale) and markets (e.g., New York City, Mexico, luxury resort) continue to see anemic demand due to the combination of economic pressures and ‘swine flu’. (3) Approximately 37% of EBITDA is derived from hotel ownership which in the near-term we believe will continue to weigh heavily on earnings prospects; (4) Anecdotally, the timeshare business remains challenging and has yet to find a bottom; while not a significant contributor to earnings, it is nevertheless another drag on cash flow; (5) Material volume of asset sales will not likely close in the near term and balance sheet exposure on St. Regis Bal Harbour condominium development is potentially significant, in our view; (6) Price/EPS valuation is at a premium (30.6x) to Starwood’s historical (21.7x) and current peer average (22.0x); and (7) Relative performance has been quite strong. Year-to-date, shares of Starwood have outperformed S&P 500 by 2,383 BP and shares of lodging C-corps. by 704 BP."

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Starwood Hotels & Resorts Worldwide, Inc. is a hotel and leisure company.

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