Starwood Hotels & Resorts Worldwide Inc. fell in New York trading after the owner of the Sheraton and W brands forecast 2014 earnings below analysts’ estimates.
Starwood today projected full-year earnings per share of $2.69 and $2.78. That’s below the average analyst estimate of $2.99, according to data compiled by Bloomberg. The shares dropped 2.2 percent to close at $75.36.
Starwood’s fourth-quarter results were hampered by the completion of condominium sales at its St. Regis Bal Harbour Resort in Florida, which contributed to earnings in the past couple of years. The Stamford, Connecticut-based company is also being hurt by slower economic growth in regions including Asia and halting recoveries in Europe.
While fourth-quarter profit was higher than analysts expected, “2014 outlook is below Street even after adjusting for asset sales,” Nikhil Bhalla, an analyst at FBR & Co. in Arlington, Virginia, said in a note to clients.
Starwood projected same-store revenue per available room, an industry measure of occupancies and rates, at its managed hotels worldwide to increase 4.75 percent to 6.75 percent after adjusting for currency fluctuations. That compares with the company’s earlier forecast of 5 percent to 7 percent growth, according to Bhalla. Starwood forecast earnings per share for the first quarter of 53 cents to 56 cents, below the average estimate of 63 cents.
Net income for the fourth quarter was $128 million, or 67 cents a share, down from $142 million, or 72 cents, a year earlier, Starwood said today in a statement. The average estimate of 10 analysts was 70 cents a share, according to data compiled by Bloomberg. Earnings from continuing operations were 73 cents a share.
Demand slowed in Asia as an influx of new hotels, especially in China, created more competition, according to Patrick Scholes, an analyst at SunTrust Robinson Humphrey Inc. in New York. Starwood gets about 20 percent of its earnings from Asia, he said.
“While we can’t tell you exactly how the year will play out in China, we have a good position in China for the long-term,” Chief Executive Officer Frits van Paasschen said on a conference call with investors.
Fourth-quarter revenue per available room declined 3 percent in Asia outside China, Starwood said. Revenue fell to $1.51 billion from $1.53 billion a year earlier.
A lack of share buybacks in the fourth quarter also was disappointing, according to Joseph Greff, a New York-based analyst at JPMorgan Chase & Co.
“And Starwood didn’t mention buyback activity in the first quarter to date, so we presume it hasn’t purchased stock so far this year either,” Greff wrote in a note to investors after results were released.
Earnings from the company’s vacation ownership and residential business fell by about $31 million in the quarter from a year earlier, Starwood said. That includes a $20 million decrease in earnings from Bal Harbour, which is “substantially sold out,” it said.
On Jan. 22, the company said it sold the resort to a unit of Qatar’s Al Faisal Holding Co. for $213 million, part of its strategy to reduce its real estate holdings. Starwood will continue to manage the property, which includes a 27-story oceanfront hotel with 207 rooms.