Starwood Looks Stellar

The hotel operator's earnings are ahead of forecasts.
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Starwood Hotels & Resorts (HOT) beat analyst expectations for its second quarter as red-hot lodging demand boosted room rates and occupancy levels.

The White Plains, N.Y.-based lodging company also raised guidance.

Starwood Tuesday said net income fell to $145 million, or 65 cents a share, from $154 million, or 72 cents a share, a year earlier, when results were boosted by a gain related to an asset disposition.

Excluding special items, Starwood earned 70 cents a share in the latest quarter. That topped the average Wall Street analyst estimate of 65 cents from Thomson First Call and was ahead of the adjusted EPS of 50 cents a year earlier.

Shares finished Monday's session at $62.48.

Revenue was $1.56 billion in the second quarter, up 14.4% from $1.36 billion a year earlier and ahead of the $1.50 billion analyst consensus.

"Our results this quarter were outstanding and we are pleased to be raising our guidance for the remainder of the year," said Steven J. Heyer, the company's CEO. "For the 11th quarter in a row, we've gained market share. I am thrilled with the progress we are making on our brand-building efforts and service innovation, which I believe will continue to keep us ahead of our competition and will accelerate our market share growth."

Starwood said revenue per available room, a key industry metric also known as revpar, jumped 12.7% year over year at comparable North American hotels. That increase was ahead of Starwood's own forecast for 10% to 12% growth. Worldwide, revpar increased 12.7%.

Margins at comparable North American hotels improved by 2.3 percentage points from a year before, much stronger than the 0.4-percentage point growth in the first quarter.

The company's vacation timeshare and residential business saw revenue increase 66.4% to $233 million from a year before. Results were driven by residential sales at the St. Regis Museum Tower in San Francisco and vacation sales in Maui, Hi., Orlando, Fla. and Scottsdale, Ariz.

Looking ahead, Starwood expects North American revpar growth between 10% and 12% in the third quarter and EPS of 51 cents, a penny better than the analyst consensus.

For the full year, the company sees North American revpar growth of 10% to 12%, better than its previous range of 9% to 11%. Adjusted EPS is expected to be $2.18, vs. the $2.13 analyst consensus.