On Jun 09, 2014, we issued an updated research report on
Starwood Hotels & Resorts Worldwide Inc.
On Apr 24, this leading hotelier posted better-than-expected first
quarter 2014 results with earnings and revenue beating the Zacks
Consensus Estimate. Earnings of 63 cents declined 17.0% year over
year owing to a decline in revenues. However, it was higher than
management's expected range of 53 cents to 56 cents per share.
Revenues decreased 5.3% year over year to $1.46 billion in the
quarter only due to the sale of The St. Regis Bal Harbor
residential project in Jan 2014. The sale was a part of the
company's asset disposition strategy for greater financial
flexibility over the long-term.
Starwood is focused on rebalancing its portfolio by increasing the
contribution from managed, unconsolidated joint venture hotels and
franchised hotels. Therefore, the company is focusing on its asset
disposition strategy that reduces earnings volatility and provides
a more stable growth profile.
Despite a year-over-year decline in the top line, margins continued
to improve throughout 2013 and into the first quarter of 2014,
driven by higher margins in North America and international
Owing to a gradual economic recovery, system-wide occupancies in
North America appear to be pretty steady and above the prior peak
level achieved in 2006. Further, more than half of Starwood's
properties are situated outside the U.S., which gives the company
wide international exposure, unlike any of its peers.
Currently, the company has a presence in the majority of cities
that account for nearly 40% of global GDP. Their growth will
automatically translate into growth for Starwood's brands.
Moreover, the company is eyeing more than 500 middleweight cities
that are set to contribute to global growth like the top 100.
According to the company, these middleweight cities are growing
faster with an increasing influx of people. With an expected rise
in global middle class from 2 billion to 5 billion people over the
next 20 years, these cities are expected to flourish as well.
However, the lingering political uncertainty in the regions where
this Zacks Rank #3 (Hold) company operates is expected to limit
sales growth. Despite its immense growth potential and the soccer
World Cup in Brazil beginning this month, a deteriorating political
situation and a weak economy continue to decelerate overall Latin
Moreover, tighter credit markets in China, the political turmoil
in Thailand, Argentine currency devaluation, unrest in Ukraine, and
Russian actions in Crimea have further added to the woes. Further,
upcoming elections in Brazil and Indonesia make the situation more
unpredictable. Fluctuation in exchange rates further add to the
Better-ranked stocks in the hotel industry include
Wyndham Worldwide Corp.
Intercontinental Hotels Group plc
Marriott Vacations Worldwide Corp.
). All these stocks have a Zacks Rank #2 (Buy).
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STARWOOD HOTELS (HOT): Free Stock Analysis
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INTERCONTL HTLS (IHG): Free Stock Analysis
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