Sunstone Hotel 2025 Q1 Earnings Misses Targets as Net Income Falls 59.7%

Sunstone Hotel (SHO) reported its fiscal 2025 Q1 earnings on May 06th, 2025. Despite the premium portfolio achieving first quarter earnings slightly above expectations amid softer revenue growth, the results did not meet analysts' expectations. The company adjusted its full-year guidance downward, reflecting heightened uncertainty and increased variability in economic outcomes. Sunstone's strategic focus remains on adapting to evolving demand while emphasizing strong capital allocation and operational resilience.

Revenue

Sunstone Hotel's total revenue for Q1 2025 rose 7.6% to $212.05 million from $197.15 million in Q1 2024. Room segment revenue reached $144.92 million, while food and beverage contributed $67.13 million. Other operating revenues amounted to $22.02 million, bringing total revenues to $234.06 million.

Earnings/Net Income

Sunstone Hotel experienced a sharp decline in EPS, down 80% to $0.01 in Q1 2025 from $0.05 in Q1 2024. Net income fell by 59.7% to $5.25 million from $13.04 million in the previous year, indicating a challenging earnings environment.

Price Action

The stock price of Sunstone Hotel edged down 2.58% during the latest trading day, increased 1.10% over the most recent full trading week, and decreased 3.82% month-to-date.

Post-Earnings Price Action Review

Over the past five years, Sunstone Hotel's strategy of buying shares after a quarter of declining revenue and holding them for 30 days yielded an 11.33% return, underperforming a benchmark return of 83.12%. This approach resulted in a compound annual growth rate (CAGR) of 2.19% and faced a maximum drawdown of -17.03%. The strategy's Sharpe ratio stood at 0.17, reflecting modest risk-adjusted returns. Despite the strategy's historical underperformance relative to the benchmark, it maintained a consistent approach amid varying market conditions. Investors considering this strategy should weigh its historical performance against broader market trends and individual risk tolerance, as past results do not guarantee future gains.

CEO Commentary

Guidance

Additional News

Sunstone Hotel Investors recently celebrated the opening of the newly transformed Andaz Miami Beach, a luxury resort featuring 287 guestrooms, a full-service spa, and premium food and beverage outlets. The renovation marks a significant milestone for Sunstone, aligning with its strategic capital allocation and portfolio enhancement goals. In Q1 2025, the company repurchased 821,771 shares of its common stock at an average price of $9.74 per share, totaling $8 million. Year-to-date, Sunstone has repurchased 2,332,320 shares, reflecting its commitment to returning capital to shareholders. Additionally, Sunstone exercised an option to extend the maturity of its $225 million Term Loan 3 by twelve months, ensuring no debt maturities before 2026, thus enhancing financial flexibility.