Strategic Hotel shares jump on CEO change
Shares of Strategic Hotels & Resorts jumped Monday after its long-time CEO stepped down ahead of the company's earnings report Wednesday.
THE SPARK: The company announced late Friday that Laurence Geller, CEO since 1997, would leave and that Rip Gellein, chairman of its board, was taking over. Geller will serve in an advisory role to Gellein until the end of the year.
THE BIG PICTURE: Strategic Hotels & Resorts Inc. is a real estate investment trust that owns and provides asset management of high-end hotels and resorts in the United States, Mexico and Europe. The entire sector has struggled as businesses cut back on travel spending, families trim vacation plans, and corporate travel managers demand tougher concessions for previously negotiated rates.
THE ANALYSIS: Raymond James analyst William Crow said that the news of Geller's departure was shocking.
Geller was "hardly perfect" as CEO, the analyst said. The company went on an aggressive, debt-fueled acquisition binge before a major industry tumble in 2008 and 2009 that nearly pushed it over the edge. But Crow said the company is now well-financed and has some of the best results in the industry.
Crow said the company's shares are undervalued given the strength of its portfolio and it has great opportunities to grow.
The analyst said that the company will not be the same following the change at the helm but ultimately, it comes down to the quality of its financial performance. Crow said he is disappointed to see Geller depart, but there is little change to the company's opportunities and potential.
The analyst reiterated an "Outperform" rating on the company's shares.
SHARE ACTION: The company's stock increased 74 cents, roughly 13 percent, to $6.31 by early afternoon. That is nearing the top of its 52-week trading range of $4.33 to $7.01.