Starwood Hotels & Resorts Worldwide Inc.
) reported first-quarter 2013 adjusted earnings from continuing
operations of 76 cents per share, breezing past the Zacks
Consensus Estimate of 53 cents by 43.4% and the year-ago level by
20.6%. Starwood's margin expansion and share buyback activities
pushed up the earnings for the quarter.
Revenues decreased 10.3% year over year to $1,539 million in
the quarter due to reduction in the revenue at Starwood's owned,
leased and consolidated joint venture hotels as well as vacation
ownership and residential businesses. The sale of 11 properties
also adversely affected the quarterly revenues.
However, the company gained in terms of occupancy and RevPAR
(Revenue per available room) and average daily rate on the back
of a surge in demand for leisure as well as business travel.
Starwood's North American business was also solid during the
first quarter. Total revenue has outperformed the Zacks Consensus
Estimate of $1,488 million by 3.4%.
Inside the Headline Numbers
Starwood earns a major portion of its revenue from its hotel
business. Apart from this, the company derived revenues from its
vacation ownership business.
Owned, Leased and Consolidated Joint Venture Hotels
Revenues at owned, leased and consolidated Joint Venture
Hotels dropped 5.7% year over year to $379.0 million, following
the sale of assets. However, worldwide RevPAR for Starwood
branded same-store owned hotels grew 3.4%, driven by a 6.3% rise
in the RevPAR in North America.
Management and Franchise Revenues
Management fees, franchise fees and other income climbed 8.0%
year over year to $217.0 million in the quarter under review.
During the first quarter, System-wide RevPAR for same-store
hotels inched up 5.0% year over year all over the world while the
same grew 3.4% internationally.
Region-wise, RevPAR in Africa and the Middle East registered
maximum growth of 7.3% during the quarter, benefited from
Starwood's growing business in the Middle East region.
Vacation Ownership and Residential Sales and
Total revenue from vacation ownership and residential sales
and services fell 39.9% to $309.0 million in the quarter as
residential revenues were down 63.5% to $132 million. However,
vacation ownership revenues were up 16.4% to $177 million led by
higher revenue gains from the company's resort business.
Worldwide same-store company-operated gross operating profit
margin was up about 52 basis points (bps) during the first
quarter with higher margin in North America. Starwood's
same-store company-operated gross operating profit margins in
North America rose 110 bps with higher RevPAR and lower
Update on Hotels
Starwood has entered into 26 hotel management and franchise
agreements with nearly 6,200 rooms during the quarter under
review. These consist of six refurbishment projects and 20 new
constructions. The company also opened 18 new properties. On the
other hand, as many as five properties exited from the company's
operation. At quarter-end, the company's pipeline included over
400 hotels, consisting of almost 100,000 rooms.
During the quarter, Starwood offloaded three properties at the
cost of $61 million.
Shareholder Value Enhanced
Starwood bought back 1 million shares worth $56 million in the
quarter. At the end of the quarter, nearly $624 million shares
remained under the current share repurchase program.
Starwood is encouraged by the current economic improvement and is
looking for new opportunities in the emerging markets, especially
in the Middle East.
For second-quarter 2013, earnings are expected to be
approximately 70 cents to 73 cents per share (including Bal
Harbor project). 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. Management fees,
franchise fees and other income are expected to be within 8% and
Starwood has raised its guidance for earnings. For full-year
2013, the company now expects that its adjusted earnings per
share will be between $2.75-$2.83 per share, up from the previous
estimate of $2.59-$2.68. Earnings in 2013 are expected to be
affected by asset sales.
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 is
expected to be within 4% and 6% in constant dollars.
Amid a sluggish economic environment, Starwood has gained from
its international exposure, strong brand recognition and growing
North American business. Starwood's achievement of more than
20.6% growth in adjusted earnings in the reported quarter and its
higher earnings guidance depicts the strength in its
fundamentals. However, decline in the company's sales remains a
Starwood currently carries a Zacks Rank #3 (Hold). Another
Wyndham Worldwide Corporation
) earnings in the first quarter beat the Zacks Consensus Estimate
but its revenues were in line with the same. Some other hoteliers
Marriott International, Inc.
Hyatt Hotels Corporation
) are going to report their first quarter earnings on Apr 30 and
May 1, respectively.
HYATT HOTELS CP (H): Free Stock Analysis
STARWOOD HOTELS (HOT): Free Stock Analysis
MARRIOTT INTL-A (MAR): Free Stock Analysis
WYNDHAM WORLDWD (WYN): Free Stock Analysis
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