What: Shares of hotel operator Starwood Hotels & Resorts Worldwide climbed as much as 10.7% on Wednesday on a quarterly earnings beat, as well as reports that said it could be bought out within the week. The stock had also popped Tuesday on buyout rumors.
So what: Starwood shares have slumped sharply in recent months on concerns over deteriorating fundamentals, but today's Q3 earnings beat -- adjusted EPS of $0.74 vs. the consensus of $0.72 -- coupled with reports that Hyatt could be close to buying it is reigniting optimism for a solid short-term pop. In fact, today's buyout speculation comes shortly after reports that several Chinese firms are also seeking approval to bid for Starwood, suggesting that there is indeed somewhat of a bidding match going on behind the scenes.
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Now what: Starwood hasn't commented on the buyout rumors, but management seems confident in their turnaround trajectory nonetheless. "Our performance is yet another indication that Starwood has been making progress on the sharply focused strategy we launched in February 2015 to strengthen our brands, drive operational excellence, and accelerate the pace of our growth," said CEO Adam Aron. "These results on both operations and development give us optimism to have a bullish outlook for 2016 as well as the future of our brands and hotels." So while Fools should never speculate too heavily on a potential takeover, Starwood's strong operational improvement might provide enough downside protection for a smallbuyout bet.
The article Why Starwood Hotels Shot Up on Wednesday originally appeared on Fool.com.
Brian Pacampara has no position in any stocks mentioned. The Motley Fool recommends Hyatt Hotels. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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