We are upgrading our recommendation on Starwood Hotels (HOT) to Outperform. The company’s fourth quarter operating earnings were well ahead of the Zacks Consensus Estimate, primarily driven by better-than-expected revenue.
Though the company continued to experience a decrease in revenue per available room (RevPAR), the rate of deterioration has moderated. In fact, in the recent months, the industry is showing signs of RevPAR improvement.
Going forward, the company’s strong pipeline, significant international exposure, solid balance sheet, shift to a fee-based business model and a less capital-intensive timeshare business augur well. However, considering the sluggish recovery of the economy and the slow booking pace, we expect the top-line improvement to be slow.Zacks Investment Research
