By: Zacks Equity Research

Starwood Hotels & Resorts Worldwide (HOT) is slated to release fourth-quarter and full-year results Thursday before the opening bell. The current Zacks Consensus Estimate for the fourth quarter is 57 cents per share in profit on revenue of $1.4 billion. For 2011, the Zacks Consensus Estimates for earnings and revenue are pegged at $1.79 billion and $5.8 billion, respectively.

The current Zacks Consensus Estimates for the fourth quarter and fiscal 2011 reflect year-over-year growth of 9.82% and 42.92%, respectively.

Earnings surprise

With respect to earnings surprises, over the trailing four quarters, Starwood has outperformed the Zacks Consensus Estimate in all the four quarters in the range of 7.69% to 33.33%. The average earnings surprise was 16.28%. This implies that the company has surpassed the Zacks Consensus Estimate by the same magnitude over the last four quarters.

Third-quarter recap

Based in White Plains, N.Y., Starwood reported third-quarter 2011 adjusted earnings from continuing operations of 42 cents, which surpassed the Zacks Consensus Estimate of 39 cents. On a reported basis, earnings from continuing operations were 60 cents compared with 25 cents in the third quarter of 2010.

The better-than-expected​ earnings in the quarter were aided by an increase in demand. Revenue jumped 9.3% year over year to $1.4 billion in the quarter, with revenue per available room witnessing a considerable growth.

Positive investor sentiment

Ahead of the earnings release, we have noticed a positive sentiment prevailing around the stock. Of the analysts covering the stock, 70% were positive while 30% rendered neutral ratings on the stock.

For the upcoming fourth quarter, one and two out of the 19 analysts covering the stock revised the estimate upward in the last 7 days and in the last one month, respectively. For full-fiscal 2011, the estimate revision was same.

Our take

We remain bullish on the stock given the company’s strong expansion plan compared to many of its peers, significant international exposure, portfolio restructuring and earnings power as well as returns to shareholders.

Starwood currently retains a Zacks No. 2 Rank, which translates into a short-term Buy rating. We are also maintaining our long-term Outperform recommendation on the stock.

Another prominent hotelier, Marriott International (MAR), will release fourth-quarter 2011 earnings on Feb. 15.

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