Starwood Hotels & Resorts Worldwide Inc.
) reported fourth-quarter 2012 adjusted earnings from continuing
operations of 70 cents, breezing past the Zacks Consensus
Estimate by a nickel, but slightly below the year-ago level of 71
cents. In full-year 2012, earnings were $2.61 ahead of the Zacks
Consensus Estimate of $2.56 and year-ago earnings of $1.93.
On a reported basis, earnings from continuing operations were
33 cents compared with 80 cents per share in the fourth quarter
of 2011. In 2012, earnings were $2.39 versus $2.57 in the
Revenues increased 0.1% year over year to $1,533 million in
the quarter, with a modest rise in revenue per available room
(RevPAR) in all regions. The revenue outperformed the Zacks
Consensus Estimate of $1,475 million. In 2012, revenues surged
12.4% year over year to $6,321.0 million.
Inside the Headline Numbers
The company continued to gain in terms of occupancy on the
back of a surge in demand for leisure as well as business
Management and Franchise Revenues
During the fourth quarter, system-wide RevPAR for same-store
hotels inched up 3.6% (4.1% in constant dollars) year over year,
all over the world. International system-wide RevPAR for
same-store hotels increased 1.5% (2.7% in constant dollars).
Management fees, franchise fees and other income climbed up 5.1%
year over year to $246.0 million in the quarter under review.
Owned, Leased and Consolidated Joint Venture
In the quarter, worldwide RevPAR for Starwood branded
same-store owned hotels jumped 0.8% (1.2% in constant dollars)
from the prior-year period. RevPAR for Starwood branded
same-store owned hotels in North America nudged up 1.4% (0.6% in
Internationally, Starwood branded same-store owned hotel
RevPAR climbed up 0.2% (1.7% in constant dollars). Revenue from
this segment in the quarter dropped 4.8% year over year to $418.0
million, following the sale of assets.
Vacation Ownership and Residential Sales and
Total vacation ownership revenue was up 6.6% to $146 million
in the quarter. Originated contract sales of vacation ownership
intervals dropped 2.3%, primarily on decreased tour flow as well
as average price. Total revenue from vacation ownership and
residential sales and services fell 5.7% to $249.0 million in the
Worldwide same-store company-operated gross operating profit
margin was up about 45 basis points (bps) during the fourth
quarter. International gross operating profit margins for
same-store company-operated properties nudged up 55 bps
Update on Hotel Rooms
Starwood has entered into 40 hotel management and franchise
agreements with nearly 8,400 rooms during the quarter under
review. These consist of 10 refurbishment projects and 30 new
constructions. The company also opened 17 new properties. As many
as 11 properties with nearly 2,600 rooms exited from the
company's operation during the quarter. At quarter end, the
company's pipeline included over 400 hotels, consisting of almost
At quarter end, Starwood had cash and cash equivalents of $428.0
million (including restricted cash amount of $123 million), while
its long-term debt was $1,273.0 million.
Shareholder Value Enhanced
The company bought back 3.5 million shares worth $180 million
in the quarter whereas it repurchased 6.3 million shares for $320
million in 2012. At the end of the quarter, nearly $180.0 million
shares have remained under the current share repurchase
The hotelier has raised its annual cash dividend by 150% from
the prior year to $1.25 per share, which was paid on Dec 28, 2012
to shareholders of record as of Dec 14.
The company is encouraged by the current economic improvement
although it is concerned with the continuous political turmoil in
a few regions.
For first-quarter 2013, earnings are expected to be
approximately 51 cents to 54 cents per share (including Bal
Harbor project). The company anticipates RevPAR growth of 4% to
6% in constant dollars at same-store company-operated hotels
worldwide, while growth will likely be 3% to 5% at branded
same-store company owned hotels worldwide. Management fees,
franchise fees and other income are expected to be within 7% and
For full-year 2013, the company expects that its adjusted
earnings per share will be between the range of $2.59-$2.68 per
RevPAR growth is expected between 5% and 7% in constant
dollars for same-store company-operated hotels worldwide. RevPAR
growth at branded same-store company-owned hotels worldwide are
expected to be within 3% and 6% in constant dollars. Management
fees, franchise fees and other income would rise by 9% to 11%.
Effective tax rate will be nearly at 32%,
Given its significant expansion plan, international exposure,
strong brand recognition and better earnings guidance, we believe
the company is well positioned to benefit from business travelers
to major North American destinations as well as international
locations, going forward. Additionally, the hotelier's continuous
enhancement of shareholders' value augurs well for the
However, we remain cautious on the stock based on a sluggish
RevPAR growth in Europe, current economic condition and
prevailing political risks in a few regions.
Starwood currently carries a Zacks Rank #2 (Buy). Another
Wyndham Worldwide Corporation
) recently declared its fourth quarter 2012 adjusted earnings of
63 cents per share, ahead of the Zacks Consensus Estimate of 60
cents per share and up 34% year over year. Wyndham currently
carries a Zacks Rank #2 (Buy).
Some other hotel companies worth a mention include
Choice Hotels International Inc.
The Marcus Corporation
). Both carry a Zacks Rank #1 (Strong Buy).
CHOICE HTL INTL (CHH): Free Stock Analysis
STARWOOD HOTELS (HOT): Free Stock Analysis
MARCUS CORP (MCS): Free Stock Analysis Report
WYNDHAM WORLDWD (WYN): Free Stock Analysis
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