Starwood Hotel & Resorts Worldwide Inc. Earnings Cheat Sheet: Profit Swings Up and Beats Street Expectations

S&P 500 (NYSE:SPY) component Starwood Hotel & Resorts Worldwide Inc. (NYSE:HOT) reversed to a profit in the third quarter, beating Wall Street estimates. Starwood Hotels & Resorts Worldwide operates in the hotel and leisure business. Its brand names include St. Regis, The Luxury Collection, W and Westin.

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Starwood Hotel & Resorts Worldwide Earnings Cheat Sheet for the Third Quarter

Results: Reported a profit of $163 million (87 cents per diluted share) in the quarter. The lodging company had a net loss of $6 million or a loss of 3 cents per share in the year earlier quarter.

Revenue: Rose 9.3% to $1.37 billion from the year earlier quarter.

Actual vs. Wall St. Expectations: HOT beat the mean analyst estimate of 39 cents per share. Analysts were expecting revenue of $1.36 billion.

Quoting Management: Frits van Paasschen, CEO said, “Our brands showed strong top-line results around the world, driving managed and franchised fees up 17% in the 3rd quarter. Our Company-operated hotels translated higher REVPAR into margin increases of 140 basis points.We are also pleased with our continued footprint growth. Over the past four years, we have opened almost 320 new hotels, bringing our total to 1,071. We expect to continue growing faster than the market, both in terms of REVPAR and footprint, thanks to our brand momentum and exposure to rapidly growing markets.”

“It is still too early to have a clear view into 2012.There are, to be sure, many clouds over the global economy.But three facts give us cautious confidence. First, in developed markets, occupancies are now at 2007 levels and at a point where rates historically have always risen. And yet, few new hotels are being built. Second, many emerging markets are continuing to see strong growth. Even if economic activity were to cool down, we see unmet demand for hotels. Third, our efforts to gain share have enabled our brands to outgrow the marketplace for more than eight quarters in a row.”

“In an uncertain world, investors should also note that our balance sheet is in great shape, with net debt below $1.7 billion. In the coming weeks, our St. Regis Bal Harbour project will start generating cash as we begin closing on previously sold residential units. We expect more cash in 2012 as we complete this project.”

Key Stats:

The company has now topped analyst estimates for the last four quarters. It beat the mark by 4 cents in the second quarter, by 4 cents in the first quarter, and by 13 cents in the fourth quarter of the last fiscal year.

Revenue has risen the past four quarters. Revenue increased 10.6% to $1.43 billion in the second quarter. The figure rose 9.1% in the first quarter from the year earlier and climbed 15.8% in the fourth quarter of the last fiscal year from the year-ago quarter.

Gross margins grew 0.5 percentage point to 23%. The growth seemed to be driven by increased revenue, as the figure rose 9.3% from the year earlier quarter while costs rose 8.6%.

Looking Forward: Analysts appear increasingly negative about the company’s results for the next quarter. The average estimate for the fourth quarter has moved down from 58 cents a share to 55 cents over the last ninety days. Over the past three months, the average estimate for the fiscal year has climbed from $1.72 per to share to $1.74.

Competitors to Watch: Marriott Intl., Inc. (NYSE:MAR), Hyatt Hotels Corporation (NYSE:H), Wyndham Worldwide Corp. (NYSE:WYN), Choice Hotels Intl., Inc. (NYSE:CHH), Silverleaf Resorts, Inc. (NASDAQ:SVLF), ILX Resorts Incorporated (ILXRQ), Bluegreen Corporation (NYSE:BXG), Red Lion Hotels Corp. (NYSE:RLH), Gaylord Entertainment Co. (NYSE:GET), and InterContinental Hotels Group PLC (NYSE:IHG).

Investing Insights: Here’s Why Chipotle’s Stock Keeps Winning.

(Source: Xignite Financials)