Starwood Hotels (HOT) Tops Q4 EPS by 21c

Starwood Hotels (NYSE: HOT) reported Q4 EPS of $0.97, $0.21 better than the analyst estimate of $0.76. Revenue for the quarter came in at $1.54 billion versus the consensus estimate of $1.53 billion.

Frits van Paasschen, CEO, said, “We delivered another solid year of performance. Worldwide REVPAR was up nearly 6% in constant dollars, and both Adjusted EBITDA and EPS were ahead of our expectations. We posted another year of rising REVPAR index, a sign of the global strength of our brands and platform. We signed 175 deals for new hotels, our second best signing year in Starwood’s history. Around the world, we opened nearly 15,000 rooms, including our 200th Westin.

“In 2014, we returned $2.4 billion to shareholders through our dividends and stock repurchases. We were able to deliver this amount by reaching our long-term target leverage, with cash flow from operations, and asset sales. During the year, we sold eight hotels for gross proceeds of over $800 million.

“As a further step in our asset-light strategy, we announced today our plans to spin-off our vacation ownership business in 2015. This transaction will create a new pure-play vacation ownership company with a seasoned management team, strong balance sheet, and great prospects for growth.

“Looking ahead to 2015, we expect more strong growth in global lodging. The U.S. economy looks set to continue its growth, and in the U.S. hotel business, limited new supply points to rising rates for some time to come. In Europe, we are optimistic that hotel performance will improve modestly. In other markets around the world, conditions are mixed. However, the underlying secular growth in demand for high-end hotels continues, and we are bullish on the prospects for our business and industry over the long-term.”

Outlook

The following outlook assumes the planned spin-off of the vacation ownership business occurs on December 31, 2015.

For the full year 2015:

• Adjusted EBITDA is expected to be approximately $1.175 billion to $1.200 billion (based on the assumptions below).
• REVPAR increases at Same-Store Systemwide Hotels Worldwide of 5% to 7% in constant dollars (approximately 300 basis points lower in actual dollars at current exchange rates).1
• REVPAR increases at Same-Store Owned Hotels Worldwide of 2% to 4% in constant dollars (approximately 550 basis points lower in actual dollars at current exchange rates).
• Margins at Same-Store Owned Hotels Worldwide increase 25 to 75 basis points.
• Core management and franchise fees increase approximately 5% to 7%.
• Management fees, franchise fees and other income increase approximately 2% to 4%.
• Earnings from the Company’s vacation ownership and residential business of approximately $140 million to $150 million.
• Selling, general and administrative expenses increase approximately 2% to 4%.
• Full year owned earnings are negatively impacted by approximately $42 million due to asset sales completed in 2014.
• Shifts in exchange rates since 2014 will negatively impact full year earnings by approximately $35 million if exchange rates stay at current levels.
• Significant non-recurring items in 2014 Adjusted EBITDA include $35 million related to five large one-time termination fees received by the Company and $11 million from the Bal Harbour residential project, which is sold out.
• Depreciation and amortization is expected to be approximately $315 million.
• Interest expense is expected to be approximately $135 million.
• Full year effective tax rate is expected to be approximately 32%, and cash taxes from operating earnings are expected to be approximately $110 million.
• EPS before special items is expected to be approximately $2.87 to $2.97 (based on the assumptions above).
• Cash flow from operations is expected to be approximately $700 million to $800 million (based on the assumptions above). Cash flow from operations includes vacation ownership investment in inventory expected to be approximately $160 million which includes approximately $80 million related to the development of the third phase of the Westin Ka’anapali Ocean Resort Villas.
• Full year capital expenditures (excluding vacation ownership inventory) are expected to be approximately $200 million for maintenance, renovation and technology. In addition, in-flight investment projects and prior commitments for joint ventures and other investments are expected to total approximately $200 million.

For earnings history and earnings-related data on Starwood Hotels (HOT) click here.

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