Starwood Hotels & Resorts Worldwide (HOT) reported earnings this morning that beat the Street on solid global revenue per available room (RevPAR), timeshare and owned property assets. EPS beat by $0.05, to $0.30 (and a $0.22 to $0.25 guide by the company), and earnings before interest, taxes, depreciation and amortization (EBITDA) was in line at $208 million (above the $195 million to $200 million guide.
EPS guidance for 2011 was raised to $1.60 to $1.70 from $1.55 to $1.65, and management maintained both its EBITDA guidance of $975 million to $1 billion and worldwide RevPAR growth of 7% to 9% (branded hotels will see 8% to 10% RevPAR). Given the issues in Middle East/Japan, higher oil prices and general consumer uncertainty, it's pretty impressive the company is guiding higher and clearly speaks to its strong diversified brands and global platform.
Systemwide RevPAR rose 10.4% and 11.9% for owned hotels, led by a 17.7% RevPAR growth figure out of the Asia-Pacific Region, 16% in Latin America and 11% in North America. Europe grew 4% and Middle East fell 4% (less than feared). Key brand growth was seen in its Aloft (25% growth), W Hotels (17%), and St. Regis (14%) names. Owned hotel profits were $49 million, or 5% higher than expected; management and franchise fees were $177 million, or 2% higher than plan and up 16% year over year; and timeshare was $42 million, or 4% better.
Worldwide margins grew 90 basis points (up 200 basis points in North America and flat international), a strong outperformance vs. Marriott (MAR) , which saw just a 30- basis-ponit improvement. During the quarter, the company signed 29 hotel management and franchise contracts, representing approximately 8,700 rooms, and opened 21 hotels and resorts with approximately 5,200 rooms. At the end of the quarter, the company had 350 hotels and 8,5000 rooms -- talk about size and scale advantages.
Overall, first-quarter results were strong, and the company remains well positioned to benefit from the global lodging recovery. I believe earnings remain conservative as the recovery improves next year, especially given the lack of supply coming online over the next few years, which will provide strong pricing power. Starwood has strong brands, focuses on the high-end/affluent customer and has a significant pipeline in place in the fast-growing emerging markets. It also has further asset sales and a strong balance sheet to continue buying back its stock (over the last three years, it's bought back a quarter of the shares outstanding). As demand improves, the leverage is real. It remains a buy, and I'll do so on weakness.
Regards,
Jim Cramer, Stephanie Link, and the Research Team
DISCLOSURE: At the time of publication, Cramer was long HOT.
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James J. Cramer is a Markets Commentator for TheStreet.com and CNBC, as well as Chairman of the Board and co-founder of TheStreet.com. TheStreet.com is a publisher. Cramer graduated magna cum laude from Harvard College, where he was president of The Harvard Crimson. After receiving his J.D. in 1984 from Harvard Law School, he joined Goldman Sachs, where he worked in sales and trading. In 1987, he left Goldman to start his own hedge fund. While he worked at his fund, Cramer helped start Smart Money for Dow Jones and then, in 1996, he founded TheStreet.com.
Stephanie Link is the director of research & vice president of strategy for TheStreet.com. She is the co-portfolio manager for Action Alerts PLUS and works daily on the strategy and stock picks chosen for the portfolio. Stephanie is also responsible for recruiting talent for the paid sites including options, technicians and fundamental contributors. Prior to joining TheStreet.com, Link worked on Wall Street for 16 years. She spent nine years at the Prudential Equity Group as a managing director in U.S. institutional sales and as the New York sales manager covering top national accounts. She was the managing director of equity research in her final year at the firm. Prior to that position, she worked at Dean Witter as an institutional sales person for six years. Link's investment specialties include large-cap core stocks as well as value ideas.