Hotel stocks are posting substantial gains Friday morning after Starwood Hotels & Resorts Worldwide Inc. (HOT) signed a pact with Sam Zell's Equity Group Investments, LLC.
Starwood Hotels stock has risen about 16% on the news, while shares of Wyndham Worldwide (WYN) and Morgans Hotel Group Co. (MHGC) have each climbed more than 10%.
Around 11:15 am ET, Starwood Hotels stock was up $3.20 at $21.10 a share, while Wyndham shares were up 73 cents at $7.28 and Mogans Hotel Group stock was up 42 cents at $5.08.
Other stocks posting gains within the sector include Home Inns & Hotels Management Inc. (HMIN), Sonesta International Hotels Corp. (SNSTA), Orient Express Hotels Ltd. (OEH) and Marriott International Inc. (MAR)
Before the opening bell on Friday, Starwood Hotels signed a confidentiality agreement with Equity Group Investments, according to a regulatory filing.
Equity Group Investments now owns 14.75 million shares of Starwood, according to the filing. The move is being perceived by some as a step toward Zell's firm taking a greater stake in Starwood, but no such intention was stated within the filing.
In late October, Starwood announced the completion of the sale of the 196-room Westin Excelsior in Venice Lido, Italy, the 191-room Hotel Des Bains in Venice Lido, Italy and the 31-room Villa Cipriani in Asolo, Italy to Estcapital-SGR S.p.A. for 164 million euros or approximately US$212 million.
Around the same time, Starwood Hotels reported a decline in its third quarter profit compared to the previous year, primarily due to higher restructuring and asset impairment charges. The company also provided guidance for the fourth quarter and full year 2008 that was below Wall Street's estimates.
For the third quarter, Starwood reported net income of $113 million or $0.62 per share, compared to $129 million or $0.61 per share in the third quarter last year. Excluding special items, income from continuing operations was $129 million or $0.71 per share, compared to $143 million or $0.68 per share in the year-ago quarter.
On average, 16 analysts polled by First Call/Thomson Financial expected the company to report earnings of $0.53 per share for the quarter.
Looking ahead, the company said it expected fourth quarter earnings before special items of about $0.36 per share to $0.42 per share. Analysts had expected the company to report earnings of $0.64 per share for the quarter.
For the full year, the company said it expected earnings before special items to be $2.07 per share to $2.13 per share. Analysts had expected the company to report earnings of $2.17 per share for the year.
For comments and feedback: editorial@rttnews.com