The Zacks Analyst Blog Highlights: Host Hotels & Resorts, Hyatt Hotels, Marriott International, Public Storage and TCF Financial

Feb 20, 2013, 09:30 ET from Zacks Investment Research, Inc.

CHICAGO, Feb. 20, 2013 /PRNewswire/ -- 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 Host Hotels & Resorts Inc. (NYSE: HST), Hyatt Hotels Corp. (NYSE: H), Marriott International, Inc. (NYSE: MAR), Public Storage (NYSE: PSA) and TCF Financial Corporation (NYSE: TCB).


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Here are highlights from Tuesday's Analyst Blog:

Host Hotels Likely to Beat in 4Q

Host Hotels & Resorts Inc. (NYSE: HST) is anticipated to beat the expectations while reporting its fourth-quarter 2012 results before the opening bell on Thursday, Feb 21.

Why a Likely Positive Surprise? Our proven model shows that Host Hotels is likely to beat earnings since it has the appropriate combination of the following 2 key ingredients:Positive Zacks ESP:

Earnings ESP (Read: Zacks Earnings ESP: A Better Method), which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +5.41%. This indicates a likely positive earnings surprise.

Zacks Rank #3 (Hold): This increases the predictive power of its ESP. The combination of its Zacks Rank and Earnings ESP assures us of a positive earnings surprise in the to-be-reported quarter.

Stocks with Zacks Ranks of #1, #2 and #3 have significantly higher chances of beating the earnings estimates. The sell rated stocks (#4 and #5) should never be considered going into an earnings announcement.

Key Drivers

Host Hotels – the largest lodging real estate investment trust (REIT) in U.S. – has luxury and upper upscale hotels across hard-to-replicate areas, which have the potential for significant capital appreciation. Benefiting from this, the company has been performing favorably and has delivered an average earnings surprise of 5.60% over the last 4 quarters.

Also, Host Hotels has been consistently making concerted efforts towards increasing shareholders wealth and accordingly, it hiked its dividend payout for the eighth time in a row during the fourth quarter.

Consistent with the upgradation of its overall portfolio, Host Hotels maintained focus on portfolio restructuring activity during the fourth quarter. Notable among these are completion of a joint venture (JV) deal with

Hyatt Hotels Corp.



) for a vacation ownership project and the acquisition of 5 hotels in Europe through a JV deal.

In addition, the sale of a Marriott International, Inc.'s(NYSE: MAR) property is a significant transaction in this respect. We expect this to provide Host Hotels with a relatively steady source of revenue and prove accretive to its fourth-quarter earnings.

Other Stocks to Consider Here is another REIT that you may want to consider as our model shows it has the right combination of elements to post an earnings beat this season:Public Storage



) has an Earnings ESP of +0.57% and carries a Zacks Rank #3. The company is scheduled to report its earnings on Feb 21, after the closing bell.

Fitch Downgrades TCF Financial

Fitch Ratings has lowered the long-term and short-term Issuer Default Ratings (IDRs) of TCF Financial Corporation (NYSE: TCB) and its subsidiaries to 'BBB-/F3'. Fitch downgraded TCF Financial after it concluded the peer review of 16 mid-tier regional banks.

Rating Rationale As per Fitch, TCF Financial's deteriorating credit quality, comparatively risky balance sheet and high level of exposure to consumer real estate loans relative to capital that has waned through strategic balance sheet restructurings are the main causes for the downward revision. In addition, lack of adequate liquidity remains a concern.

Asset quality at TCF financial has been constantly deteriorating due to high level of consumer-related problem loans. TCF Financial has the worst nonperforming asset ratio (NPA ratio) among the mid-tier regional group. At the end of 2012, NPA ratio stood at 7.50%, surging 24 basis points year over year. Elevated net charge-offs add to the already-stressed credit quality.

Further, increasing credit costs will negatively impact profitability. Higher levels of pre provision net revenue (PPNR) owing to the company's business strategy and balance sheet structure has resulted in a loan-to-deposit ratio of nearly 110%, comparatively high for TCF Financial's rating. However, Fitch expects overall earnings performance to be marred by the requirement of higher provisions to maintain reasonable reserve levels.

Fitch also noted that capital levels considerably have reduced due to restructuring of balance sheet. The current capital levels may prove disastrous if the credit trends deteriorate.

Fitch has reaffirmed its rating outlook on TCF Financial at 'Negative'. The rating agency is of the idea that further negative revision will be fuelled by failure to stabilize credit risk, which in turn will lead to deteriorated earning performance and low capital levels. Also, if TCF Financial's new strategies fail to augment its financial condition, it will lead to downgraded outlook.

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