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The Zacks Analyst Blog Highlights: Starwood Hotels & Resorts Worldwide, Marriott International, Automatic Data Processing, Paychex and Insperity

HOT MAR ADP PAYX NSP

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For Immediate Release

Chicago, IL – February 3, 2012 – 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 & Resorts Worldwide Inc. ( (HOT - Analyst Report), Marriott International Inc. ( (MAR - Analyst Report), Automatic Data Processing Inc. ( (ADP - Snapshot Report), Paychex Inc. ( (PAYX - Snapshot Report) and Insperity Inc. ( (NSP - Snapshot Report).

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Here are highlights from Thursday’s Analyst Blog:

Starwood Continues to Shine

Starwood Hotels & Resorts Worldwide Inc. ( (HOT - Analyst Report) has reported fourth-quarter 2011 adjusted earnings from continuing operations of 71 cents, which surpassed the Zacks Consensus Estimate of 57 cents as well as the year-ago level of 52 cents. In full-fiscal 2011, earnings were $1.93 versus $1.25 in the year-ago period.

On a reported basis, earnings from continuing operations were 80 cents compared to $1.08 in the fourth quarter of 2010. In full-fiscal 2011, earnings were $2.57 versus $1.63 in the year-ago period.

Revenues jumped 14.3% year over year to $1,531 million in the quarter, with revenue per available room witnessing a modest growth. The revenue also outperformed the Zacks Consensus Estimate of $1,397 million. In full-fiscal 2011, revenue grew 10.9% year over year to $5,624.0 million.

Outlook

For first-quarter 2012, earnings are expected to be approximately 49 cents to 53 cents per share. The company anticipates RevPAR growth of 5% to 7% in constant dollars at same-store company operated hotels worldwide while growth will likely be 4% to 6% at branded same-store company owned hotels worldwide.

For full-year 2012, the company increased its earnings guidance to the range of $2.22–$2.33 (previously $1.96–$2.25) per share. RevPAR growth is expected between 5% and 7% in constant dollars for same-store company operated hotels worldwide. REVPAR increases at branded same-store company owned hotels worldwide are expected between 4% and 6% in constant dollars.

Our Take

Starwood is a beneficiary of a recovery in leisure as well as business travel. We remain bullish on the stock given the company’s strong expansion plan compared to many of its peers, significant international exposure, portfolio restructuring and earnings power as well as returns to shareholders.

Like past quarters, Starwood raised its earnings guidance, reflecting its sound business model. For 2012, management remains hopeful on emerging markets.

Starwood, which competes with Marriott International Inc. ( (MAR - Analyst Report), currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are maintaining our long-term Outperform recommendation on the stock.

Another Acquisition for ADP

Automatic Data Processing Inc. ( (ADP - Snapshot Report) recently announced the acquisition of privately held PhyLogic Healthcare LLC, a well known provider of revenue cycle management (RCM) and medical billing outsourcing services. However, terms of the transaction were not disclosed.

Founded in 2001, Springfield, Massachusetts-based PhyLogic provides billing and accounts receivable services to medical practitioners across the U.S. The company also provides electronic health records (EHR) and cloud-based practice management (PM) solutions. Post acquisition, PhyLogic will be integrated into ADP’s medical office software division, AdvancedMD that was acquired in early 2011.

The acquisition of PhyLogic marks an important addition to ADP’s portfolio, as it will help the company to enter the fast growing RCM market. The U.S. RCM market is expected to grow from approximately $4 billion in 2010 to more than $9 billion by 2018, driven by the upcoming medical reimbursement regulation changes, according to ST Advisors, LLC.

We believe that the PhyLogic acquisition will help ADP to seize this significant opportunity over the long term. Moreover, PhyLogic’s client base primarily consists of small- and mid-size U.S. medical practitioners, a niche market that ADP has been focusing on for some time. ADP is also expected to widen its presence in the small business services segment through this acquisition.

Our Take

ADP’s growth in recent years has been largely driven by accretive acquisitions, for which it has spent approximately $776 million in 2011 itself. If the latest acquisitions are anything to go by, then the company clearly intends to continue along the same lines in 2012.

In early January, ADP entered the lucrative Indian market with the acquisition of Ma Foi Consulting Solutions Ltd, an Indian human resource and payroll management company. The acquisition is a strategic fit for the company as it will facilitate further expansion in developing markets. Through this acquisition, ADP will gain access to the growing market of human resource business process outsourcing (HR BPO) in India.

We believe that the back-to-back acquisitions will drive top-line growth for fiscal 2012 and beyond. The acquisitions are expected to diversify ADP’s revenue base, which in turn will help the company to outperform the market, in our view.

However, increasing competition from Paychex Inc. ( (PAYX - Snapshot Report) and Insperity Inc. ( (NSP - Snapshot Report) and a gloomy macro outlook in North America and Europe are major headwinds in the near term. Additionally, higher unemployment rates and low interest rates remain concerns for the company’s payroll processing business.

We maintain our Neutral recommendation on the stock over the long term (6-12 months). Currently, ADP has a Zacks #3 Rank, which implies a Hold rating on a short-term basis.

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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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