Zacks Analyst Blog Highlights: Starwood Hotels, Marriott International, Brasil Telecom, Telemar and Vale do Rio Doce

Business Wire, April 29, 2008

CHICAGO -- 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: Starwood Hotels and Resorts Worldwide (NYSE: HOT), Marriott International Inc. (NYSE: MAR), Brasil Telecom Participacoes S.A. (NYSE: BRP), Telemar (NYSE: TNE) and Companhia Vale do Rio Doce (NYSE: RIO).

See the latest posts to the Analyst Blog:

http://www.zacks.com/blog/post_info.html?g=6

Here are highlights from Monday's Analyst Blog:

Starwood Hotels Target Increases

We maintain our Buy rating for Starwood Hotels and Resorts Worldwide (NYSE: HOT) following the release of strong Q1 financial results. We consider the company's significant exposure to international markets to be a positive attribute that should help Starwood to weather the economic downturn in the U.S. market. We continue to believe that Starwood deserves a premium valuation, given the company's well-positioned portfolio. Starwood is currently trading at approximately 10.9x our 2008 EBITDA estimate.

Marriott International Inc. (NYSE: MAR) currently trades at approximately 10.8x our 2008 EBITDA estimate. Starwood's stock had declined from near $75 per share in mid-July to under $40 per share in mid-January. Some of the decline during the summer was likely in response to the tightening credit markets, and the perceived difficulties now present in obtaining financing for private-equity buyouts. As Starwood was seen by many on the Street as a potential takeout candidate, we believe the decline has in large part removed the buyout-premium that was likely reflected in HOT's share price.

We believe that the pullback during last fall was likely the result of an increased focus by investors on the company's vacation ownership business, which has to some extent overshadowed the strength in the company's hotels operations. Most recently, concerns over the overall health of the economy, along with uncertainties regarding consumer spending going forward, led to further share price declines.

Brasil Telecom Target $104

We are keeping our current Buy recommendation on Brasil Telecom Participacoes S.A. (NYSE: BRP). The company posted better-than-expected results in the first quarter of 2008, and the short-term outlook remains positive. The company also has solid cash flow, decent operating margins in the wireline business, and an attractive valuation.

Additionally, the growth in the wireless and the broadband segments are encouraging and should continue in future quarters. The news on the merger with Telemar (NYSE: TNE) was not confirmed, but we still believe it will happen soon. That will be positive for both companies.

BRP is trading at 11.3x our 2008 EPS estimate, below the industry mean and median, and an enterprise value to EBITDA (a more common valuation metric for the telecom industry) of just 3.1x our 2008 estimate. We think the stock is trading at a highly attractive valuation. Additionally, the company posted very good results for the first quarter 2008 and the short-term outlook seems promising.

RIO Outlook Strong as Iron

We are keeping our Buy recommendation on Companhia Vale do Rio Doce (NYSE: RIO). RIO reported slightly below expectation results for the first quarter of 2008. The main problem was lower nickel prices and some losses in commodity derivatives due to extreme volatility. Nevertheless, we remain highly encouraged by the continued economic growth in Asia, particularly in China, which has been driving demand for minerals.

The recent 70% price hike for iron ore for 2008 will positively affect the company's results in the following quarters. RIO is trading at 10.8x our forward 2008 EPS estimate. Over the past five years, RIO has consistently maintained a price/earnings (P/E) ratio below that of the industry.

We believe investors have been giving the company a discount valuation relative to peers due to its heavy exposure to Brazilian political and economic risks and its above average leverage. However, the Brazilian economy is showing growth and there is a considerable likelihood for Brazil to be upgraded in the short-term making it investment grade, a fact that will have a meaningful impact on the valuation of Brazilian stocks.

Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.

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