Tuesday, May 3, 2011

Starwood Hotels & Resorts Worldwide Inc. Stock Downgraded (HOT)

Starwood Hotels & Resorts Worldwide (NYSE:HOT) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, generally poor debt management and weak operating cash flow.
Highlights from the ratings report include:
  • The debt-to-equity ratio of 1.27 is relatively high when compared with the industry average, suggesting a need for better debt level management. To add to this, HOT has a quick ratio of 0.64, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Hotels, Restaurants & Leisure industry. The net income has decreased by 6.7% when compared to the same quarter one year ago, dropping from $30.00 million to $28.00 million.
  • STARWOOD HOTELS&RESORTS WRLD's earnings per share declined by 6.3% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, STARWOOD HOTELS&RESORTS WRLD turned its bottom line around by earning $1.63 versus -$0.01 in the prior year. This year, the market expects an improvement in earnings ($1.69 versus $1.63).
  • The revenue growth came in higher than the industry average of 2.3%. Since the same quarter one year prior, revenues slightly increased by 9.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
Starwood Hotels & Resorts Worldwide, Inc., together with its subsidiaries, operates as a hotel and leisure company worldwide. It primarily operates luxury and upscale full service hotels, resorts, retreats, and residences. The company has a P/E ratio of 33.3, above the average leisure industry P/E ratio of 23.9 and above the S&P 500 P/E ratio of 17. Starwood Hotels & Resorts Worldwide has a market cap of $11.7 billion and is part of the sevices sector and leisure ndustry. Shares are down 2% year to date as of the close of trading on Friday.

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