Starwood Hotels Q3 Profit Beats View, But Sees Q4 Earnings Below Estimates

(RTTNews) - Starwood Hotels & Resorts Worldwide, Inc. (HOT) on Tuesday reported a 31 percent decline in profit for the third quarter, reflecting one-time charges and lower revenues.

However, adjusted earnings per share for the quarter beat analysts' expectations, while revenues missed their estimates.

Looking ahead, the company forecast earnings for the fourth quarter below Street expectations, citing recent volatility in markets outside the U.S. along with a strengthening U.S. dollar. In addition, the company tightened its earnings outlook for fiscal 2014.

Frits van Paasschen, CEO of Starwood Hotels, said, "We delivered strong results in the third quarter, with both EBITDA and EPS ahead of expectations. Worldwide REVPAR grew by over seven percent in constant dollars. In North America, occupancies reached record levels for the sixth consecutive quarter, and REVPAR was up over nine percent."

For the third quarter, net income attributable to the company was $109 million or $0.59 per share, down from $157 million or $0.81 per share in the prior-year quarter.

Special items in the latest quarter totaled a charge of $12 million after-tax, compared to a benefit of $20 million after-tax in the year-ago period.

The benefit in the year-ago period primarily related to a favorable adjustment to a legal reserve, tax benefits associated with a non-core asset sale and the reversal of a valuation allowance on deferred tax assets which are now deemed realizable.

Excluding special items, adjusted earnings per share for the latest quarter were $0.66, compared to $0.71 per share in the year-ago period. On average, 24 analysts polled by Thomson Reuters expected the company to report earnings of $0.65 per share for the quarter. Analysts estimates typically exclude special items.

Revenues for the quarter declined 1 percent to $1.49 billion from $1.51 billion in the same period last year. Analysts' consensus revenue estimate for the quarter was $1.51 billion.

Revenues from owned, leased and consolidated joint venture hotels declined 1 percent from the year-ago period to $393 million. Vacation ownership and residential sales and services declined 21 percent to $159 million.

However, management fees, franchise fees and other income increased 3 percent to $255 million.

Worldwide system-wide RevPAR for same-store hotels increased 7.5 percent from last year. The increase was 7.4 percent in constant dollars. Worldwide REVPAR for Starwood same-store owned hotels grew 7.7 percent in actual dollars, and rose 7.2 percent in constant dollars.

System-wide REVPAR for same-store hotels in North America increased 8.8 percent in actual dollars, and rose 9.1 percent in constant dollars.

Looking ahead to the fourth quarter, Starwood Hotels forecast earnings in a range of $0.73 to $0.77 per share. Analysts expect the company to report earnings of $0.78 per share for the quarter.

For fiscal 2014, Starwood Hotels now forecasts adjusted earnings per share before special items of $2.79 to $2.83 per share, compared to the prior range of $2.78 to $2.85 per share. Street expects the company to earn $2.84 per share for the year.

For fiscal 2015, Starwood expects REVPAR at same-store company-operated Hotels worldwide to increase 4 percent to 6 percent in constant dollars.

The company noted that asset sales, a closed hotel, and leased hotels that were converted to managed and franchised contracts completed to date will reduce 2015 owned hotel earnings by about $9 million year over year.

Van Paasschen said, "Recent volatility in markets outside the U.S. along with a strengthening U.S. dollar are likely to be headwinds in the fourth quarter and into 2015."

HOT closed Monday's trading at $81.04, up $1.02 or 1.27 percent on a volume of 3.20 million shares.