Starwood Hotels (HOT) Tops Q2 EPS by 4c

Starwood Hotels (NYSE: HOT) reported Q2 EPS of $0.79, $0.04 better than the analyst estimate of $0.75.

Starwood Hotels sees FY2015 EPS of $2.93-$3.03, versus the consensus of $2.99.

Starwood Hotels sees Q3 2015 EPS of $0.69-$0.73, versus the consensus of $0.74.

Outlook

• The following outlook assumes the planned spin-off of the vacation ownership business occurs on December 31, 2015. Transaction costs related to the planned spin-off are not included in full year SG&A guidance.

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 4% to 6% in constant dollars (approximately 400 basis points lower in actual dollars at current exchange rates).
  • REVPAR increases at Same-Store Owned Hotels Worldwide of 5% to 7% in constant dollars (approximately 650 basis points lower in actual dollars at current exchange rates).
  • Margins at Same-Store Owned Hotels Worldwide increase 50 to 100 basis points.
  • Core fees increase approximately 2% to 4%.
  • Management fees, franchise fees and other income are expected to be approximately flat.
  • Earnings from the Company’s vacation ownership and residential business of approximately $155 million to $165 million.
  • SG&A decreases approximately 2% to 4%.
  • 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 St. Regis Bal Harbour residential project, which is sold out.
  • Shifts in exchange rates since 2014 will negatively impact full year earnings by approximately $41 million if exchange rates stay at current levels.
• Depreciation and amortization is expected to be approximately $307 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 $135 million.
• EPS before special items is expected to be approximately $2.93 to $3.03 (based on the assumptions above).
• Cash flow from operations is expected to be approximately $740 million to $840 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 Westin Nanea Ocean Villas, 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 the three months ended September 30, 2015:

• Adjusted EBITDA is expected to be approximately $285 million to $295 million (based on the assumptions below).
  • REVPAR increases at Same-Store Systemwide Hotels Worldwide of 4% to 6% in constant dollars (approximately 550 basis points lower in actual dollars at current exchange rates).
  • REVPAR increases at Same-Store Owned Hotels Worldwide of 4% to 6% in constant dollars (approximately 800 basis points lower in actual dollars at current exchange rates).
  • Core fees increase approximately 1% to 3%.
  • Management fees, franchise fees and other income increase 2% to 4%.
  • Earnings from the Company’s vacation ownership and residential business of approximately $35 million to $40 million.
  • Shifts in exchange rates since the third quarter of 2014 will negatively impact third quarter 2015 earnings by approximately $11 million if exchange rates stay at current levels.
• EPS is expected to be approximately $0.69 to $0.73 (based on the assumptions above).

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

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