Starwood’s 2nd-Quarter Net Up 12%, Again Raises Year-View
Starwood Hotels & Resorts Worldwide Inc.’s (HOT) second-quarter earnings rose 12%, topping the hotel company’s own expectations, as lower expenses outweighed a drop in revenue.
For 2013, Starwood again raised its view for the year, now expecting adjusted per-share earnings of $2.81 to $2.88 from its prior boosted view of $2.75 to $2.83. The company forecast current-quarter earnings of 60 cents to 64 cents a share, while analysts surveyed by Thomson Reuters recently expected 62 cents.
For the quarter, Starwood reported a profit of $137 million, or 71 cents a share, versus $122 million, or 62 cents a share, a year earlier. Excluding one-time items, per-share earnings from continuing operations were up at 79 cents from 70 cents. In April, Starwood had predicted per-share earnings of 70 cents to 73 cents a share for the quarter.
Revenue slipped 3.5% to $1.56 billion, line with what analysts polled by Thomson Reuters had most recently forecast.
Costs and expenses dropped 4.7% to $1.31 billion.
Starwood, which has the Westin, Sheraton and W Hotels brands, has previously said it is seeing higher room rates in North America, driven by tight supply. The company is also investing more aggressively in emerging markets like China and India to take advantage of the huge growth opportunities from the growth of the middle class in those countries. Last week Starwood said it plans to expand its hotel portfolio in Mexico by 30%, as it also increasingly looks for growth opportunities in Latin America.
Thursday, Chief Executive Frits van Paasschen attributed the company’s profit beat to SG&A cost control and good margin performance at Owned and Managed hotels.
“The global recovery continues,” he said. “Tight supply in North America and Europe is the order of the day, with virtually no new high-end hotels coming on stream.”
He also noted that Starwood’s occupancies in Europe are close to 72%. In North America they reached 76%, the highest Starwood has ever reported.
For the quarter, Starwood reported its revenue per available room, a key performance measure for the industry, rose 3.9% in dollars system-wide at comparable hotels worldwide.
Revenue from vacation ownership tumbled 24% to $239 million. Meanwhile revenue from owned, leased and consolidated joint venture hotels fell 7.5% to $419 million.
Shares closed Wednesday at $63.32 and were inactive premarket. The stock has risen 28% in the past 12 months.