The Zacks Analyst Blog Highlights: Ocwen Financial, Goldman Sachs Group, Morgan Stanley, JPMorgan Chase and Starwood Hotels & Resorts Worldwide

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Jan 17, 2012, 09:30 ET

CHICAGO, Jan. 17, 2012 /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 Ocwen Financial Corporation (NYSE: OCN), Goldman Sachs Group Inc. (NYSE: GS), Morgan Stanley (NYSE: MS), JPMorgan Chase & Co. (NYSE: JPM) and Starwood Hotels & Resorts Worldwide Inc. (NYSE: HOT).

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Here are highlights from Monday's Analyst Blog:

Ocwen Upgraded to Outperform

We have upgraded our long term recommendation on Ocwen Financial Corporation (NYSE: OCN) to "Outperform" from "Neutral". The main reasons behind this raise are the company's stable liquidity position and expected synergies from the recent servicing portfolio acquisitions that would support its financials.

We believe that Ocwen's principal reduction programs are expected to significantly contribute to its loan modification ability. However, until capital and debt markets stabilize, the company's bottom line would remain under pressure. Although the near-term economic outlook remains unpredictable owing to market volatility and a contraction in subprime mortgage-servicing rights (MSRs), the company remains committed to loan modifications.

Over the years, Ocwen has been growing through acquisitions and alliances. In the last few months, the company completed the acquisition of Litton Loan Servicing from Goldman Sachs Group Inc. (NYSE: GS) and announced its plan to buy Saxon Mortgage Services Inc. from Morgan Stanley (NYSE: MS). Also, the company announced the purchase of certain mortgage servicing portfolio from JPMorgan Chase & Co. (NYSE: JPM). Given the ongoing deterioration in home prices, we anticipate Ocwen to get even more opportunities to acquire distressed servicing portfolios at attractive prices.

Though the economic recovery is sluggish, the company continues to solve loan problems. Through its active participation in Home Affordable Modification Program (HAMP), which seeks to prevent foreclosures and make housing more affordable, Ocwen has converted its efforts into profitable financials. Going forward, modifying more loans faster will not only aid Ocwen improve customer retention and bring down the level of advances but also reduce costs.

Ocwen has been restructuring its business and operations to tap the growth opportunities in a changing economic scenario. The company has been disposing off its non-core operations, mainly focusing on key investments in the most profitable ventures available. Over the longer term, this growth strategy will help Ocwen enhance the operating leverage.

On the flip side, we believe fragile economic recovery in the equity and debt markets will continue to pressurize Ocwen's bottom line in the medium term. Further, interest expenses are also expected to rise based on increasing funding requirements.

Additionally, Ocwen continues to face increased expenses due to legal and regulatory issues. The company will keep defending itself in a number of cases where its mortgage servicing practices have been challenged, a process that can be lengthy and distracting.

Ocwen currently retains a Zacks #1 Rank, which translates into a short-term 'Strong Buy' rating.

Starwood to Expand in India

Starwood Hotels & Resorts Worldwide Inc. (NYSE: HOT) recently revealed its intention to open 20 more hotels in India by 2015. Starwood currently operates 33 hotels in that country. The hotelier sees significant opportunities for growth in India, which is under-hoteled to meet its future demand.

Starwood's emergence in India dates back to 1973. Being one of the largest international hotel operators of four and five star hotels, Starwood has become one of India's most sought after global brands. In fact, since 2009, Starwood has opened nearly as many hotels in India as rivals Hyatt, Hilton and Marriott combined.

The demand for hotels is greater in international markets than in the U.S., especially in the Asia-Pacific region, where the pace of economic recovery is faster. Starwood can capitalize on this trend as its international exposure is wider than most of the other hoteliers. Around 80% of the company's 85,000 room pipeline is outside the developed world. The key growth markets in Asia-Pacific were China and India.

The middle income population in India is growing, presently accounting for more than 200 million people. Indian consumers continue to enjoy double-digit growth in per capita income, while the population of high net-worth individuals has grown over 80% in the last five years. This fraction of the population has also an inclination to spend on travel and leisure. Moreover, a long-standing presence in this country allows Starwood to have a stable relationship with owners and developers across the country. All these factors testify to Stawood's second largest Asian hotel development pipeline in India.

Initially, the mid-market, tech-savvy and affordable brands like Aloft and Four Points by Sheraton stole the show in India. But now the company focuses on its high-end brands as well targeting India's rapidly growing high net-worth individuals who seek sophistication in travel experience. With the opening of the ITC Grand Chola Rajputana in 2012, Starwood's Luxury Collection brand will have nine hotels in India, making it the brand's second largest market next to the U.S.

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