Starwood Gets Hot on Earnings

The hotelier tops expectations and boosts its outlook for 2004, sending shares higher.
By TSC Staff ,

Starwood Hotels & Resorts

(HOT)

posted better-than-expected fourth-quarter earnings, and a strong outlook and signs of improving business travel helped send the company's stock up 6% in premarket activity.

The White Plains, N.Y.-based hotelier said fourth-quarter earnings totaled $87 million, or 42 cents a share, down 6.6% from $91 million, or 45 cents a share, a year earlier. Revenue rose 3.1% to $1.2 billion. Excluding items, Starwood earned 24 cents a share in 2002's fourth quarter.

For the current quarter, Wall Street was expecting earnings of 32 cents a share, according to the Thomson First Call consensus estimate.

Revenue per available room -- or revpar, a key metric for the hotel industry -- increased 6.6% worldwide and 4.7% in the U.S. during the fourth quarter, indicating that business travel is picking up.

"The positive trends we saw emerge in September continued through the fourth quarter as the weakness in group business was more than offset by continued strength in business transient, powered by significant market share gains in nearly every brand in our system," said Starwood Chairman and CEO Barry Sternlicht. "Indeed, without the major unanticipated increases in workers compensation, our performance and margin growth in the fourth quarter would have been much better."

In premarket trading, shares of Starwood rose $2.12 to $37.02 a share.

Looking forward, Starwood boosted its guidance. Assuming revpar increases 5% to 6% in same-store hotels in North America, Starwood said net income would be $16 million, or 8 cents a share. Wall Street currently expects earnings to be flat.

"It is indeed remarkable that given the long war and SARS impact on our global enterprise, that revenue for the year was actually up (excluding asset sales)," Sternlicht said. The company's strategic investments "allow us to increase 2004 expectations for earnings and cash flow significantly. Our global pipeline has perhaps never been deeper or of higher quality."

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