On Jul 30, we upgraded our recommendation on
Starwood Hotels & Resorts Worldwide Inc.
) from Neutral to Outperform based on better-than-expected
second-quarter 2013 results and increased earnings guidance.
Why the Upgrade?
Starwood's earnings of 79 cents per share in the second quarter
of 2013 breezed past the Zacks Consensus Estimate by 8.2% and
grew 12.9% year over year. Earnings also came ahead of the
company guided range of 70-73 cents per share. Solid margin
expansion drove earnings in the quarter, which made up for the
sluggish top-line performance in the quarter.
Buoyed by this better-than-expected performance, Starwood raised
its full-year earnings guidance from the range of $2.75 - $2.83
to $2.81-$2.88 per share. This is the second time that Starwood
has increased its full-year earnings guidance this year.
Owing to an improving trend in the North American business,
system-wide occupancies at Starwood hotels in the region appeared
to be pretty steady at 76% in the second quarter. The hotelier is
also poised to tap the reviving economic condition in the
emerging markets. More than half of the hotel's properties are
situated outside the U.S., which gives the company wide
international exposure, unlike many of its peers.
We believe, going forward, the company's strong pipeline,
significant international exposure, shift to a fee-based business
model, asset disposition strategy, portfolio restructuring and
existing asset revamp initiatives will facilitate the company's
uphill ride. Compared to its peers, the company is expanding at a
steady pace. Moreover, regular share repurchase activity and
dividend distribution are bolstering shareholder value. Starwood
currently carries a Zacks Rank #3 (Hold).
Other Stocks to Consider
Other players in the hotels sector that are currently performing
Wyndham Worldwide Corp.
Orient-Express Hotels Ltd.
). All these companies carry a Zacks Rank #2 (Buy).
STARWOOD HOTELS (HOT): Free Stock Analysis
MARCUS CORP (MCS): Free Stock Analysis Report
ORIENT EXP HOTL (OEH): Free Stock Analysis
WYNDHAM WORLDWD (WYN): Free Stock Analysis
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