Starwood Hotels Q1 Results Beat View; To Explore Strategic Alternatives

(RTTNews) - Starwood Hotels & Resorts Worldwide, Inc. (HOT) on Wednesday reported a 28 percent decline in profit for the first quarter from last year on lower revenues. However, both revenue and adjusted earnings for the quarter beat analysts' estimates and the company raised its earnings outlook for fiscal 2015.

Separately, the company said it will explore strategic and financial alternatives to increase shareholder value. Shares of the company are gaining more than 8 percent in pre-market activity.

Adam Aron, CEO on an interim basis, said, "In the first quarter, our overall results were ahead of our expectations, and with the actions we are taking to improve our performance going forward, we are modestly increasing our guidance range for both Adjusted EBITDA and EPS excluding special items for full year 2015."

Net income attributable to the company for the first quarter declined to $99 million or $0.58 per share from $137 million or $0.72 per share in the same period last year.

Excluding special items, earnings from continuing operations for the quarter were $0.65 per share, compared to $0.63 per share in the year-ago period. On average, 23 analysts polled by Thomson Reuters expected the company to report earnings of $0.57 per share for the quarter. Analysts estimates typically exclude special items.

However, revenues for the quarter declined 3 percent to $1.42 billion from $1.46 billion in the prior-year quarter. Analysts' consensus revenue estimate for the quarter was $1.39 billion.

Worldwide Systemwide Revenue Per Average Room or REVPAR for same-store hotels increased 5.2 percent in constant dollars, or 1.9 percent in actual dollars.

Revenue from owned, leased and consolidated joint venture hotels declined 13 percent to $316 million, impacted by asset sales since the first quarter of 2014.

Vacation ownership and residential sales and services revenues increased 8 percent to $187 million. Management fees, franchise fees and other income decreased 3 percent to $240 million.

Costs and expenses for the quarter were flat with last year at $1.26 billion.

During the quarter, the company signed 33 hotel management and franchise contracts, representing about 6,000 rooms. The hotel chain also opened 20 hotels and resorts with approximately 3,200 rooms.

Looking ahead to the second quarter, Starwood forecast earnings per share of about $0.70 to $0.74. Analysts expect the company to report earnings of $0.79 per share for the first quarter.

For fiscal 2015, the company now forecasts earnings before special items in a range of $2.94 to $3.04 per share, up from the prior range of $2.87 to $2.97 per share. Street expects earnings of $2.97 per share for the year.

The firm's guidance assumes the planned spin-off of the vacation ownership business on December 31, 2015.

Separately, the company said its board of directors has decided to explore full range of strategic and financial alternatives to increase shareholder value. The board has retained Lazard to help in the process.

Bruce Duncan, chairman of the Board, said, "...we will thoroughly explore the full range of strategic and financial alternatives available to Starwood to capitalize on our industry-leading global platform and best-in-class premium brands. No option is off the table, and we will take the time we need to thoroughly evaluate our opportunities and achieve the best result for our shareholders, business partners, and associates."

The board is in the beginning stage of the strategic and financial review, and no assurance can be given as to its outcome or timing, Starwood added.

While reporting its fourth-quarter results in February, Starwood said it plans to spin-off its vacation ownership business, Starwood Vacation Ownership or SVO, into a separate publicly traded company.

The move is expected to accelerate Starwood's ongoing 'Asset Light' transformation, and create a new pure-play vacation ownership company to take advantage of growth opportunities in the timeshare industry.

HOT closed Tuesday's trading at $80.80. In Wednesday's pre-market activity, the stock is up $6.90 or 8.54 percent to $87.70.