2014

The Zacks Analyst Blog Highlights:Peabody Energy, Starwood Hotels & Resorts Worldwide, Marriott International, InterContinental Hotels Group and Hyatt Hotels

CHICAGO, July 23, 2013 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Peabody Energy Corp. (NYSE: BTU-Free Report), Starwood Hotels & Resorts Worldwide Inc. (NYSE: HOT-Free Report), Marriott International Inc. (NYSE: MAR-Free Report),InterContinental Hotels Group (NYSE: IHG-Free Report) and Hyatt Hotels Corp. (NYSE: H-Free Report).

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Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Monday's Analyst Blog:

Will Peabody Beat Earnings Estimates?

Peabody Energy Corp. (NYSE: BTU-Free Report) will release its second quarter 2013 financial results before the market bell on Jul 23, 2013. In the prior quarter, this coal operator reported a positive earnings surprise of 64.29%. Peabody currently has a Zacks Rank #4 (Sell). Let's see how things are shaping up at Peabody prior to this announcement.

Factors to Consider This Quarter

The soft performance of the coal industry in 2012 lingered in the first half of 2013.  However, the demand for coal is likely to pick up in the subsequent quarters with an increase in natural gas prices.

In this commodity supply surplus environment mine operators are selectively developing mines to cope with the slackness in demand. This situation has prompted Peabody to lower its capital expenditure for 2013 by nearly 50% from the 2012 level to a range of $450 million to $550 million.

Peabody is also working to lower its operating expenses and has undertaken cost saving initiatives. The cost savings could be marginally offset by expenses involved in implementation of longwall operations in Twentymile Mine, in Routt County, Colo., and in Wambo Mines in New South Wales, Australia.

However, there is some good news for the coal industry. The World Steel Association projected nearly 3% year-over-year growth in global steel usage in 2013 and 2014. Positive steel fundamentals can drive the demand for Peabody's premium coal.

In addition, nearly 300 gigawatts of coal fired power units will come on-line globally over the next five years. Since the expansion will mainly take place in the developing economies where production of coal is much lower than domestic demand, it could open up new shipment opportunities for Peabody.

Earnings Whispers

Our proven model does not conclusively show that Peabody Energy is likely to beat earnings this quarter. That is because a stock needs to have both a positive earnings Expected Surprise Prediction (ESP) (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here.

Positive Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is at +40.0%. This is a leading indicator of a likely positive earnings surprise for the shares. Zacks Rank #4 (Sell): Peabody's Zacks Rank #4 complicates the forecasting power making surprise prediction difficult. We caution against stocks with Zacks Ranks #4 and 5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Starwood Broadens Mexican Exposure

Starwood Hotels & Resorts Worldwide Inc. (NYSE: HOT-Free Report) is set to beef up its Mexican portfolio. The company recently announced plans to extend its hotel base in the region by 30%.  Starwood has a considerable presence in Mexico. Featuring 24 hotels under 8 brands, Mexico is Starwood's biggest market in Latin America.  

At present, Starwood has 8 new upper-upscale hotels under construction in Mexico, which will add nearly 1,100 rooms to its current count of 4800 rooms in the country. The Mexican market will play a pivotal role in Starwood's aim to open as many as 100 hotels in Latin America by the end of 2013. Starwood targets to ramp up its luxury portfolio in Mexico by 50% over the next three years.

In fact, to gain a competitive edge in Mexico, Starwood formed a global partnership with Aeromexico, the national airline of Mexico to bolster their respective loyalty programs –Starwood Preferred Guest and Aeromexico Club Premier. This strategic alliance, signed on Jul 15, will allow Starwood members to redeem their points at Aeromexico and vice versa.

Why Mexico?

Owing to the saturation in the U.S market, major hoteliers are exploring growth opportunities abroad. The current trend shows that economic strength has been slowly shifting from the developed world to the rapidly growing economies and this transition has not escaped Starwood's notice. Going by this trend, Central and South America promise solid growth going forward.

Among Latin American countries, Mexico is set to witness a surge in demand driven by the resurgence of the middle class, a fraction of which spends considerably on travel and leisure. Apart from tourism, the region is also emerging as a business hub. Also, lower crime rates in the country have ensured that U.S.-groups are once again taking an interest in Mexico.

Solid performance in Mexico led the company to post flat revenue per available room (RevPAR) in Latin America in the first quarter of 2013, despite the Argentinian issues. Mexican RevPAR was up 10%. The region is expected to continue performing well in the near future.

Moreover, thanks to a long-standing presence in this country, Starwood enjoys a stable relationship with owners and developers across the country. Therefore, Starwood sees more construction opportunities in Mexico with an abundance of natural resources.

Bottom Line

Pent-up demand both in the luxury and mid-market segment in Mexico is making Starwood broaden its exposure in that country. However, this Zacks Rank #1 (Strong Buy) should be wary of its competitors, as major hoteliers like Marriott International Inc. (NYSE: MAR-Free Report),InterContinental Hotels Group (NYSE: IHG-Free Report) and Hyatt Hotels Corp. (NYSE: H-Free Report) too have a considerable presence in Mexico.

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

SOURCE Zacks Investment Research, Inc.



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