Earnings Preview: Starwood Hotels & Resorts

OVERVIEW: The hotel industry has suffered this year as consumers and businesses have curbed spending due to rising airfares, soaring gas prices and eroding credit. White Plains, N.Y.-based Starwood, which operates mostly upscale hotels, has not been immune to those pressures.

But investors were relieved in April when Starwood reported adjusted first-quarter earnings above Wall Street's expectations and lifted its full-year profit outlook.

For the second quarter, Starwood anticipates revpar growth between 10 percent and 12 percent at its worldwide same-store company operated hotels. Revpar, or revenue per available room, is considered a key gauge of a hospitality company's performance.

The company expects growth between 5 percent and 7 percent at its hotels in North America that have been open at least a year.

BY THE NUMBERS: Analysts polled by Thomson Financial predict earnings of 52 cents per share on revenue of $1.49 billion. Starwood forecast second-quarter profit between 50 cents and 54 cents per share.

ANALYST TAKE: Analysts appear divided on Starwood's outlook. Wachovia Capital Markets analyst Jeffrey Donnelly said Starwood's high international exposure should act as a buffer against the weakening U.S. environment.

Lehman Brothers analyst Felicia Hendrix also said that favorable foreign exchange rates and strong revpar in Great Britain should partially offset the slowdown in U.S. growth. She expects Starwood to meet the low-end of its worldwide revpar guidance but said the company may not meet its North American forecast.

Goldman Sachs analyst Steven Kent placed Starwood on its "Conviction Sell" list, arguing that he expects fundamentals to start deteriorating in both the higher-end segments of the lodging industry and international markets.

WHAT'S AHEAD: Starwood is starting to roll out its "green" hotel brand, Element, this month, with 20 more hotels scheduled to open in the next year. The hotels are built with technology that saves water and cuts electricity use, including heat-reflecting roofing and energy-efficient appliances.

STOCK PERFORMANCE: Starwood's shares fell 23 percent in the quarter, closing at $40.07 on June 30. The stock has traded between $30.26 and $74.63 during the past 52 weeks.