First the good news. While analysts had been expecting to see the company show earnings of 49 cents a share, the company was actually able to come in higher, with 51 cents per share. However, despite showing 2 cents better than expected, this still represents an 11% drop in earnings from continuing operations.
With so much uncertainty around the company going into this morning's earnings report, you may assume that beating its number by 2 cents would have the stock moving higher in premarket trading. Well, you would be wrong. The stock is actually trading down a little more than 6% following the news.
The earnings season was officially launched last night with Alcoa Inc. (NYSE: AA) reporting better than expected numbers, and tomorrow we are going to see another big name, Marriott International (NYSE: MAR) report its second quarter numbers.
The company is due to report its current earnings prior to the market open, and going into tomorrow's report analysts are looking to see the company show 49 cents per share on $3.15 billion in revenues. The housing slump over the past year has definitely been hurting hotel operators, so it will be interesting to see what kind of quarter Marriott is able to show to its investors.
The last time the hotel chain released its quarterly numbers was back on April 17, when it matched analyst estimates for its first quarter with 33 cents per share. The stock made a brief rally following the release, but over the past month has been in a solid downward trend.
In a short article tucked away The Wall Street Journal today, there is an interesting marketing idea being presented: using vouchers to bring in paying guests. But to me, the new plan to give away vouchers for free gasoline as a means to bring in guests is not a very exciting idea. In fact, how many ways and in how many languages can you say stupid?
If lower costs do not drive hotel bookings, does the brilliant marketing team at Sleepin' Now & Sellin' Later think that there is any possible way to bring up occupancy with a $50 carrot? I don't think so.
It goes without saying that diversification is one defense against the onset of a bear market. Further, occasionally the market offers a conglomerate that possesses many of the characteristics of a diversified mutual fund or portfolio, and with the above in mind, Loews is worth a review.
Loews (NYSE: LTR) is a holding company with operations that include property / casualty insurance, hotels, offshore oil/gas drilling, natural gas pipelines, and cigarettes. Don't confuse LTR with that other company with a similar-sounding name: LTR is a conglomerate.
Analysts really like LTR's Diamond Offshore deepwater/midwater oil rig operations, which, as one might sense, are experiencing strong demand and pricing power, given the global drive for more oil. Analysts are equally impressed by LTR's natural gas pipeline business.
Starwood Hotels & Resorts Worldwide (NYSE: HOT) announced today that its W Hotels unit will open W Bangkok in 2011. The new hotel will feature 400 rooms and will be part of a mixed-use development in Bangkok's commercial and diplomatic center. If you think that the company will not fall by too much over the next few months, now could be a good time to look at a bullish hedged trade on HOT.
After climbing to a one-year high of $75.45 in July, HOT took a nosedive to a 52-week low of $52.63 just six weeks later in August. The stock has had a bumpy ride over the past few months, but appears to be settling in with support just below $60. HOT opened this morning at $59.55. So far today, the stock has hit a low of $59.06 and a high of $61.53. As of 3:00 p.m., the stock was trading at $60.46, up $0.72 (1.21%). HOT's chart is improving from bearish to neutral, while S&P gives the stock an encouraging 4 STARS (out of 5) buy rating.
For a bullish hedged play on this stock, I would consider a January bull-put credit spread below the $45 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 6.4% return in just 3 months as long as HOT is above $45 at January expiration. Starwood Hotels would have to fall by more than 25% before we would start to lose money.
HOT hasn't been below $45 since October 2004 and has shown support in the upper $50's recently. This trade could be risky if the company's earnings (due out 10/25) disappoint, but even if that happens, this position could be protected by strong historical support around $55. Additionally, HOT has a strong history of beating earnings estimates, with the company's last earnings miss coming in Q1 2003.
Meg Massie is an options analyst and writer at Investors Observer. DISCLOSURE: At publication time, Meg neither owns nor controls positions in HOT.
The Hard Rock cafe chain of restaurants and casinos is gearing up for a massive expansion plan around the world. The cafe chain, which was purchased last year by the native American Seminole Tribe of Florida announced yesterday plans to expand the business by up to 100%.
The new expansion plan envisions seeing the Hard Rock logo popping up on cafes, hotels and casinos in some of the fastest growing markets around the world, including China, India and eastern Europe. Currently the chain has around 125 cafes and the new business plan is looking to double that number to upwards of 250 cafes globally.
When is a 150 to 200 room hotel a boutique hotel? Not very often in my book. Perhaps in Manhattan, Boston or Chicago but I'm not sure it would be such in the western states. For large players in the hotel industry like Marriott International (NYSE: MAR) and hotelier Ian Schrager perhaps 200 rooms represents a boutique hotel, which usually refers to a small property typically offering an enhanced level of service and marketed to the affluent.
From my perspective as an architect, developer, investor and frequent hotel user I would say that 200 rooms is fair size in most places. You would need a good size parcel of land to accommodate 40 rooms per floor plus the lobby, reception and common areas found on the first floor, plus parking. So these boutiques are that in name only, because a five or six story building is going to be a high-rise by definition.
Now from a service perspective I expect that Marriott and Schrager, who developed the concept of smaller, stylish hotels 23 years ago, look to have a very strong partnership plan and will offer a quality product. Schrager and Marriott Thursday said "they plan as many as 100 hotels in the next decade." Schrager, who first came to fame through Studio 54 in the 1970s, now develops ultra-swanky properties such as New York's Grammercy Park Hotel.
As a stock investor I took a look at the metrics this morning and have to shy away. Marriott's P/E (TTM) of 27.1 is ten points higher than the S&P average, the P/S (TTM) of 4.91 is double or triple what I would be willing to pay and I can buy real estate directly all day long for far less than a 6.57 book value (MRQ). The latter P/B metric is not a direct correlation but still makes me think better bargains will be found elsewhere. It also has too high a Price/Cash Flow of 21.34 and pays a very small dividend.
Marriott closed yesterday at $46.11 and is off a few cents today as I write this post. The deal does look promising for the new partners but I am not sure that it will bring much to Marriott shareholders since it is incrementally small and MAR is currently capitalized at $17.7 billion.
Those of you who are new to BloggingStocks can check out my other stories and read Chasing Value or Serious Money to find more potential opportunities and verify my track record as well.
Sheldon Liber is the CEO of a small private investment company and the vice president for design and research at an architecture & planning firm. Check out his other posts for BloggingStocks here.
Trump Entertainment Resorts (NASDAQ: TRMP) shares soared more than 20% on Friday after the company disclosed that "The Strategic Committee has recently received preliminary and conditional indications of interest from parties proposing to acquire the Company. There can be no assurance that any of these indications of interest will result in a sale of the Company or any other transactions."
Given that the company had already announced that it was for sale and already jumped on that news, the shares may have gotten ahead of themselves today. But the storyline that interests me is this: If the casinos are sold, is it possible that the Trump name will be removed?
With the ratings of The Apprentice continuing to show weakness in the latest season (even after a move to L.A. to spice things up), I would argue that the Trump name may be suffering from overexposure. His huge ego may have finally turned off the public, and his book with Robert Kiyosaki is probably the worst thing I've ever read.
I just wonder whether the Trump name has much value anymore. There's no question that everyone knows it, but what is the average person's impression of Trump?
Online travel is a commodity business where people's sole loyalty comes from whoever gives them the lowest price. While in theory that's great for consumers, that's lousy for investors. The travel sites are big advertisers because they need to convince people that they are different from one another and that they can offer better bargains then each other and the service providers.
The public is bombarded with a confusing array of advertising about where they can get the best travel deals on the Web. Both Orbitz and Expedia offer $50 travel coupons to people who find better prices online within 24 hours of booking a trip on their sites. Airlines make the same promise as do hotels and car rental companies.
If all of these claims are accurate, why should anyone even bother using Expedia or Orbitz?
I realize travel providers need Expedia and Orbtiz because they can't sell all of their excess inventory themselves.
But is that a good enough reason to invest in either company?
Hilton Hotels (NYSE: HLT), having set a goal of 1,000 new international properties in the next 10 years, is making major strides in developing the Middle East and Africa. A new management arm has been created to guide the company's 44 existing properties in the region, as well as the 13 currently in development. The new office will be headquartered in Dubai, United Arab Emirates, (to house Halliburton emigres?).
Hilton intends to add another 20 projects in the Middle East in the next five years. This week, it celebrates the opening of its second UAE. hotel, the Hilton Ras Al Khaimah Resort & Spa. Another UAE property, The Hilton Jumeirah Beach Residence, is scheduled to open early next year. The Hilton Beirut is scheduled to open this year, and early next year the refurbished Luxor in Egypt should reopen. New hotels will also open in Morocco, Algeria, Jordan, Qatar, and Kuwait in the next two years.
The company announces 1st quarter earnings on Monday. Analysts expect earnings of $.18. The market seems to like what they've seen so far of Hilton's strong international focus. Brokers surveyed by Thompson are split between 'buy' and 'strong buy' recommendations.
Starwood Hotels & Resorts Worldwide Inc. (NYSE: HOT) Chief Executive Steven Heyer passed up $35 million in severance after he was ousted following allegations of personal misconduct.
In an interview with the Wall Street Journal [subscription required], Heyer said he gave up the money because "life is too short" to defend himself against the allegations. "I'm burned out," he told the paper "I wanted to walk away from this job with my head held high."
Heyer's attempt at taking the high road is hard to believe.
An anonymous letter sent to Starwood's board in February had 10 specific instances that alegedly showed that Heyer had created a "hostile work environment," the Journal said, adding that Heyer was accused of making inappropriate physical contact with a female employee outside a public restroom. Heyer denied the allegations.
There must have been pretty damning evidence against him for Heyer to give up a big severance package. He still isn't poor, though, collecting $250,000 in salary, a $2 million bonus, and restricted stock that has vested worth $4.8 million, Bloomberg News said.
Starwood deserves credit for acting swiftly and decisively in this matter. These days, companies have little tolerance these days for this type of boorish behavior from chief executives or anyone else for that matter.
There may be a silver lining in this for investors.
Since Heyer vowed to keep Starwood independent, his departure may lead to a sale of the hotelier to founder Barry Sternlicht, the owner of Starwood Capital, or other private-equity firms, according to Bloomberg.
The luxury hotel business is highly sensitive to macroeconomic factors. Economic downturns and travel disruptions can seriously impair profits. Rising oil costs and political instability can also impede travel. But the world's most recognized great luxury hotel brand, Four Seasons Hotels (NYSE: FS) has protected itself wisely from the cyclical nature of the market, primarily because it doesn't own most of its 70 properties throughout 31 countries. Instead, it signs long term contracts (60-80 years on average) with hotel owners, putting the onus on the owners to pay for costly maintenance and renovation.
Four Seasons has maintained its brand identity better than any other hotelier out there. It refuses to lower its prices, even when the economy takes a downturn. Other hotels cut prices and downsize staff, and the brands suffer as a result. Not Four Seasons. Its average room revenue remains the highest in the business.
The company is expanding its brand name beyond lodging into resident ownership clubs and luxury residential developments -- perhaps having missed the height of the residential bull market.
Further, FS is active in pushing growth outside of the saturated US market. Four Seasons expects the number of properties under management to double over the next 10 years, and many of them are in the emerging and profitable Asian and Middle Eastern markets. So if the US economy takes a hit, FS has other markets to pick up the slack.
Type of stock: A luxury hotel chain with a stellar brand name that protects itself from the volatile market by managing, rather than owning, the majority of its 70 hotels, and continuing to push into emerging and profitable markets like Asia.
Price target: Trading at $64.49, Wall Street expects revenues to rise an average of 9.5% annually over the next five years. As Four Seasons moves further into the management, rather than ownership, business, operating margins will continue to rise. This is a winner at this price, and I'd hang on for the long term.
As we discussed in our earnings preview yesterday, hotel manager Marriott International (NYSE: MAR) reported its second quarter numbers this morning, and as we expected, we were given some more troublesome news from the company.
The earnings season was officially launched last night with 
It goes without saying that diversification is one defense against the onset of a bear market. Further, occasionally the market offers a conglomerate that possesses many of the characteristics of a diversified mutual fund or portfolio, and with the above in mind, Loews is worth a review.
The Hard Rock cafe chain of restaurants and casinos is gearing up for a 
Hilton Hotels
The luxury hotel business is highly sensitive to macroeconomic factors. Economic downturns and travel disruptions can seriously impair profits. Rising oil costs and political instability can also impede travel. But the world's most recognized great luxury hotel brand, Four Seasons Hotels (NYSE: FS) has protected itself wisely from the cyclical nature of the market, primarily because it doesn't own most of its 70 properties throughout 31 countries. Instead, it signs long term contracts (60-80 years on average) with hotel owners, putting the onus on the owners to pay for costly maintenance and renovation. 
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