Starwood Hotels & Resorts Worldwide Inc.
) reported third-quarter 2012 adjusted earnings from continuing
operations of 58 cents, breezing past the Zacks Consensus
Estimate of 53 cents, but fell shy of the year-ago level of 60
STARWOOD HOTELS (HOT): Free Stock Analysis
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On GAAP basis, earnings from continuing operations were 75 cents
compared to 85 cents in the prior-year quarter.
Revenues grew 6.0% year over year to $1,455.0 million in the
quarter, with revenue per available room (RevPAR) witnessing
strong growth as occupancy ascended at all regions. Revenue also
outperformed the Zacks Consensus Estimate of $1,448.0 million.
Management and Franchise Revenues
System-wide RevPAR for same-store hotels inched up 1.3% (4.7% in
constant dollars) year over year all over the world.
International system-wide RevPAR for same-store hotels increased
3.0% (3.9% in constant dollars). Management fees, franchise fees
and other income climbed up 8.4% year over year to $219.0 million
in the quarter under review.
Owned, Leased and Consolidated Joint Venture
Worldwide RevPAR for Starwood branded same-store owned hotels
fell 2.2% (up 2.3% in constant dollars) from the prior-year
period. RevPAR for Starwood branded same-store owned hotels in
North America dipped 0.5% (nudged up 0.6% in constant dollars).
Internationally, Starwood branded same-store owned hotel RevPAR
slipped 3.7% (up 3.8% in constant dollars). Revenue from this
segment in the quarter dropped 3.6% year over year to $425.0
million following the sale of four assets.
Vacation Ownership and Residential Sales and
Total vacation ownership revenue was up 2.2% to $141 million.
Originated contract sales of vacation ownership intervals dropped
1.2%. Total revenue from vacation ownership and residential sales
and services surged 48.6% to $208.0 million in the quarter.
Update on Hotel Rooms
During the quarter under review, Starwood signed 25 hotel
management and franchise contracts for approximately 4,800 rooms.
These consist of 7 conversion projects and 18 new constructions.
The company also opened 20 new properties. Four properties
(approximately 800 rooms) exited the system during the quarter.
At quarter end, the company's pipeline included over 370 hotels,
representing almost 95,000 rooms.
At quarter end, Starwood had cash and cash equivalents of $795.0
million (including $144 million of restricted cash), while its
long-term debt was $1,653.0 million.
Shareholder Value Enhanced
In the third quarter of 2012, the company bought back 1.6 million
shares for about $78.7 million. This leaves the current share
repurchase authorization at $360.0 million as of September 30,
The hotelier also raised its annual cash dividend by 150% from
the prior year to $1.25 per share.
For fourth-quarter 2012, earnings are expected to be
approximately 64 cents to 66 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 4% at branded
same-store company owned hotels worldwide.
For full-year 2012, the company raised its adjusted earnings
guidance to the range of $2.55-$2.57 (previously $2.49-$2.56) per
RevPAR growth is expected between 5% and 6% in constant dollars
for same-store company-operated hotels worldwide. RevPAR
increases at branded same-store company-owned hotels worldwide
are expected between 3% and 4% in constant dollars.
Starwood is poised to benefit from the reviving economy and
consequent increase in demand for hotels. Moreover, the raised
earnings outlook for 2012 and increased annual dividend reflects
the company's sound business model. Additionally, the hotelier's
sturdy expansion plan as compared to many of its peers,
significant international exposure, portfolio reformation and
continuous enhancement of shareholders' value augurs well for the
company. However, we remain cautious on the stock based on
sluggish RevPAR growth in Europe coupled with stiff competition.
Starwood, which competes with
Marriott International Inc.
), currently retains a Zacks #3 Rank, which translates into a
short-term Hold rating. We are maintaining our long-term Neutral
recommendation on the stock.