On Monday, UBS analyst Chris Woronka updated the financial model for shares of Park Hotels & Resorts (NYSE: PK), resulting in a raised price target to $15.00 from the previous $14.00, while keeping a Neutral rating on the stock.
The revision follows Park Hotels & Resorts' third-quarter earnings report and the recent finalization of long-term labor agreements at several key properties, including the Hilton Hawaiian Village Waikiki Beach Resort and the Hilton Boston Logan Airport.
The analyst noted a decrease in the fourth-quarter revenue per available room (RevPAR) forecast to -5% year-over-year from an earlier prediction of +1%. This change aligns with the company's guidance, which suggests a range between -7% and -3%, and is below the consensus estimate of -3%.
Park Hotels & Resorts reported that preliminary October RevPAR was down -1.3% year-over-year, or +3.5% when excluding the impact of labor disruptions at four hotels, which are estimated to negatively affect the quarter by 600-700 basis points.
Consequently, the fourth-quarter EBITDA estimate has been lowered to $128 million from $150 million, reflecting the reduced RevPAR forecast. This adjustment is consistent with the company's guidance of $121-141 million and is under the street's expectation of $136 million.
The adjusted funds from operations (AFFO) estimate for the quarter has also decreased to $0.37 from $0.51, matching the company's guidance of $0.33-0.43 and falling below the street's projection of $0.41.
Looking ahead to the full year 2024, the UBS analyst has revised the RevPAR growth estimate downward to +2.1% year-over-year from the previous +3.5%. This revision is in response to the third-quarter RevPAR falling short of estimates and the lowered fourth-quarter RevPAR forecast, which is in line with the company's guidance of +1.5-2.5%.
Park Hotels & Resorts has reduced their FY'24 RevPAR guidance by 200 basis points at the midpoint to up +1.5-2.5% year-over-year, citing the entire cut as driven by hurricane and labor-related disruption.
In other recent news, Park Hotels & Resorts Inc. reported a slight increase in Q3 revenue per available room (RevPAR), rising by 3.3% to approximately $190, despite seasonal disruptions. The company's earnings call also pointed to the sale of non-core assets and a steady dividend, indicating a strategic focus on long-term shareholder value and portfolio reinvestment.
In the midst of challenges, Park Hotels & Resorts saw strong performance in urban and resort markets, particularly in Orlando and Miami, with record revenues at the Bonnet Creek Complex in Orlando and a significant RevPAR increase at Casa Marina Resort due to renovations. The company has invested over $200 million in property renovations, expected to be completed by early 2025.
Despite an 8% RevPAR decline in Hawaii due to disruptions, the management expressed optimism for future demand in the region. The company expects strong group revenue trends to continue, with significant bookings for 2024 and 2025.
Analysts from different firms have noted the company's robust RevPAR growth in urban markets like Chicago, New Orleans, and Boston at 14%, and an 11% increase in resort markets, particularly Orlando and Miami. Despite these positive developments, the company has faced challenges such as the impact of labor strikes and Hurricane Helene on RevPAR growth.
InvestingPro Insights
Park Hotels & Resorts (NYSE: PK) presents an intriguing investment case, as highlighted by recent InvestingPro data and tips. The company's P/E ratio of 9.25 suggests it may be undervalued compared to its peers, aligning with the UBS analyst's neutral stance and revised price target. This is further supported by an InvestingPro Tip indicating that PK is "Trading at a low earnings multiple."
Despite the analyst's lowered RevPAR and EBITDA estimates, PK maintains a strong dividend yield of 6.9%, with an impressive dividend growth of 66.67% over the last twelve months. This generous shareholder return is emphasized by another InvestingPro Tip stating that PK "Pays a significant dividend to shareholders," which could be attractive to income-focused investors in the current economic climate.
The company's financial health appears stable, with an EBITDA of $649 million for the last twelve months as of Q3 2024, showing a growth of 5.02%. This positive EBITDA trend may provide some reassurance to investors concerned about the short-term RevPAR challenges mentioned in the analyst report.
For investors seeking a deeper understanding of Park Hotels & Resorts' financial position and potential, InvestingPro offers 11 additional tips, providing a comprehensive view of the company's strengths and market position in the Hotel & Resort REITs industry.
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