Starwood Lodging Trust’s third-quarter earnings almost doubled on hotel acquisitions and higher room rates, boding well for its planned $13.3 billion purchase of ITT Corp., analysts said.
Funds from operations - a key measure of a real estate investment trust’s finances - rose 93 percent to $48.8 million, or 80 cents a share, from $25.3 million, or 60 cents, a year earlier. The results beat the average estimate of 73 cents a share of eight analysts polled by First Call Corp.
Starwood Chairman Barry Sternlicht has been on a spending spree the past year, acquiring or agreeing to buy about $16.4 billion in properties. The pending purchases of Westin Hotels & Resorts for $1.57 billion and ITT and its Sheraton chain would make Starwood the world’s largest hotel operator.
“They’re running this thing well and they’re continuing their acquisition success,” said Steve Cohen, director of research at Kellner, DiLeo & Co., which owned 163,000 ITT shares as of June. “Right now, these guys have captivated the investment community.”
Starwood’s shares rose 81-1/4 cents to $60.37 in trading of 1.4 million, three times the three-month daily average. The stock, which has more than doubled in the past year from about $29, earlier reached a record $61.50.
Revenue rose 94 percent to $236.9 million from $122.1 million.
Starwood, in a conference call, gave few new details on the ITT purchase or what it plans to do with some of ITT’s assets, analysts said. They expect Starwood to either spin off or sell the 83 percent stake in ITT Educational Services Inc. and its telephone book business.
Phoenix-based Starwood on Monday agreed to buy ITT for $82 a share - $15 in cash and $67 in stock - topping a hostile offer of $70 a share, or $11.5 billion, from Hilton Hotels Corp.
Hilton said it won’t raise its offer, though it will put its bid before ITT shareholders in the chance that Starwood’s stock falters by the Nov. 12 annual meeting. That could make Hilton’s offer, which includes more cash, more attractive.
Starwood’s main advantage over Hilton is a structure that, like most REITs, allows it to shelter some income from corporate taxes if it distributes at least 95 percent of its net income to shareholders as a dividend. It’s also one of four REITs paired with a sister company that can operate other kinds of businesses such as hotels, which traditional REITs cannot do.
In the quarter, Starwood said it added interests in 20 properties with about 5,700 rooms for $720 million. It currently operates or owns 119 hotels with about 32,200 rooms.
The additions of Westin and ITT would give it about 650 hotels in 70 countries with annual revenue of about $10 billion.
Some of the stocks that moved substantially or traded heavily Friday:
Avon Products, up 6-7/8 at 73-3/4
The direct seller late Thursday said its will take pretax charges of $150 million to $200 million over the next two years to cover restructuring costs, including the elimination of 30 percent of its beauty-products line.
Sofamor/Danek Group, up 5-7/16 at 69-1/8
The Memphis-based manufacturer of computer-assisted surgery products reported third-quarter earnings that met Wall Street estimates.
Proteon, down 7/8 at 2-1/16
The Westboro, Mass.-based company reported late Thursday a wider loss for the third quarter than a year ago.
DSI Toys, down 3-3/8 at 4-1/2
The Houston-based company said it expects its third-quarter earnings to come in below market expectations.
WFS Financial, down 3-9/16 at 14-1/8
The Irvine, Calif.-based consumer finance company late Thursday reported third-quarter earnings that were well below analyst estimates.