Starwood Hotels & Resorts Worldwide, Inc. (HOT) recently hit a new 52-week high on the company’s cautious optimism for 2010 as high-end consumers drive demand for it’s high-margin rooms and suites.
Company Description
Starwood Hotels & Resorts Worldwide, Inc. together with its subsidiaries, operates as a hotel and leisure company worldwide under such names as St. Regis, The Luxury Collection, W, Westin, Sheraton and Four Points. The company primarily operates luxury and higher-end properties, with a portfolio of 979 hotels and 292,000 rooms. Starwood was founded in 1969 and has a market cap of $8.16 billion.
Fourth-Quarter Surprise of 132%
Starwood reported better than expected Q4 results on Feb 4 that showcased the company’s rebound from a tough 2009. Revenue was mostly flat from last year at $1.29 billion, but earnings came in much better than expected at 51 cents per share, 132% ahead of the Zacks Consensus Estimate. The company has beat in each of the last four quarters by an average of 113%.
Starwood made strides to strengthen its balance sheet and capital structure. Its total debt load is down $1 billion to $3 billion, while its 2013 maturities were reduced to $1 billion from $2.9 billion. All debt maturities in 2010 and 2011 have been paid down. The company is also focused on reducing its expenses, with SG&A costs down $100 million from 2008.
Starwood CEO Frits D. Van Paasschen acknowledged that the company still faces headwinds, but added an optimistic touch, saying, “During the summer, we saw the beginning of stabilization. We believe there is light at the end of the tunnel, as business is following patterns similar to the recovery post 9/11.”
Estimates Up
The encouraging outlook sent estimates higher, with the current year adding 10 cents to 66 cents and the next-year estimate adding 11 cents to $1.03, a bullish 56% growth projection.
After the solid gains of the last year, this stock does not come cheap, trading with a forward P/E multiple of 67X, a steep premium to the overall market.
The Chart
Shares of HOT just broke above a short-term level of resistance at $42 to hit a new 52-week high. Look for support at the breakout area on a pull back, take a look below.
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