Wachovia Cuts Felcor Lodging to 'Underperform'
Wachovia downgraded Felcor Lodging (FCH ) to underperform from market perform.
Analyst Jeffrey Donnelly says expectations for flat revenue per available room (RevPAR) growth, continued gross margin declines, and management's decision to cease paying a dividend and aggressively dispose of noncore assets could place signficant downward pressure on earnings per share and valuation.
He further cut the $1.74 2003 funds from operations estimate to $1.23. Based upon 2003 the earnings estimate (before interest, taxes, depreciation and amortization) of $270 million to $280 million, Donnelly estimates the fair value of shares to be in the $6.50 to $8.50 range.