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Updated Research Report on Starwood Hotels

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On Mar 13, 2014, we issued an updated research report on Starwood Hotels & Resorts Worldwide Inc. .

On Feb 13, this leading hotelier reported mixed fourth quarter results with earnings beating the Zacks Consensus Estimate and revenues missing the same. However, the company expects earnings to decline year over year in first quarter and full year 2014. Estimates for the company mostly moved downwards in response to the cautious guidance provided by the company.

Starwood’s fourth-quarter adjusted earnings from continuing operations of 73 cents per share beat both the Zacks Consensus Estimate and the year-ago quarter’s earnings of 70 cents by 4.3%. Lower interest expenses supported earnings growth.

Starwood’s revenue decreased 1.8% year over year to $1.51 billion in the fourth quarter and missed the Zacks Consensus Estimate by nearly 2%. The top-line reflects lower vacation ownership and residential sales owing to lower sales at the Bal Harbour unit. The company has sold almost all the residential units at Bal Harbour, which will hurt revenues in future quarters.

Meanwhile, the lingering political uncertainty in Europe, Latin America, and in some parts of Africa and the Middle East and an economic slowdown in China could further limit sales growth of this Zacks Rank #3 (Hold) company.

However, Starwood’s strong developmental pipeline, asset disposition strategy and shift to a fee-based business model bodes well for long term growth.

The company’s significant international exposure helps it to withstand cutthroat competition in the current environment. With the rise in global travel demand, Starwood expects 2014 to be solid in terms of openings and new agreements in India, Latin America, Japan, Thailand and Oceania.

Expanding international footprint is the need of the hour. Therefore, in a concerted effort to strengthen their portfolio, other leading hoteliers like Marriott International, Inc. (MAR - Free Report) , Hyatt Hotels Corp. (H - Free Report) and Intercontinental Hotels Group plc (IHG - Free Report) are also busy unveiling properties worldwide.

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