Market Overview

4 Hotel Stocks JMP Securities Thinks Will Outperform The Market

4 Hotel Stocks JMP Securities Thinks Will Outperform The Market

On February 25, JMP Securities issued a note updating ratings and price targets on the hotel/lodging sector, including:

  • Strategic Hotels and Resorts Inc (NYSE: BEE)
  • Chatham Lodging Trust (NYSE: CLDT)
  • DiamondRock Hospitality Company (NYSE: DRH)
  • La Quinta Holdings Inc (NYSE: LQ)

Tale Of The Tape - Past Year


Strategic Hotels & Resorts - Market Outperform

JMP reiterated its Market Outperform rating, but lowered its PT from $16 (13.7x 2015E EBITDA) to $15.50 (15x 2016E EBITDA) after the BEE earnings call.

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  • "BEE's earnings call appeared to focus 2015 guidance pointing to slower total RevPAR growth relative to rooms RevPAR growth, but it appears that Strategic Hotels & Resorts is still driving higher group revenue and improving mix, particularly at its resort locations."
  • "Same-store U.S. RevPAR grew 7.3% during 4Q, driven by a 5.9% increase in ADR, and a 100 bps increase in occupancy."
  • "Between completing $2.5B of balance sheet transactions and recycling $400M through the sale of the Four Seasons Punta Mita and Marriott Grosvenor Square, BEE reduced its leverage ratio by 2 turns last year, taking the ratio to 5x," (still at the high end of its target range).

Chatham Lodging Trust - Market Outperform

JMP reiterated its Market Outperform rating, and raised its PT from $31 (13.5x 2015E EBITDA) to $36 (13.0x 2016E EBITDA) -- adjusted for Chatham's JV interests.

  • Chatham's revised 2015 FFO guidance "dipped below the company's previously published $2.45-$2.55 range, we believe these issues have explanations that do not point to any broader problems…"
  • "CLDT guided full-year FFO to $2.30-$2.45, below the last provided range, reflecting the impact of the upsized equity deal from last month (4.0M vs. original 2.5M shares)."
  • JMP noted that "2014 was a strong year for Chatham - EBITDA was up 64%, FFO was up 75%, FFO per share was up 28%, and the dividend was up 25%."
  • JMP's bottom line was Chatham's "momentum is not decelerating, and we believe additional acquisitions this year will boost growth above current guidance."

Diamondrock Hospitality - Market Outperform

  • JMP reiterated its Market Outperform rating and maintains its $17 PT, (14x 2015E EBITDA).
  • JMP noted, "Half of the hotels in the portfolio posted double-digit 4Q RevPAR and 15 of the portfolio's 27 hotels grew property EBITDA by more than 200 bps."
  • Diamondrock's adjusted 4Q EBITDA came in at $60.8 million, or $1.2 million above JMP's $59.2 million estimate.
  • "DRH continues to cycle out of non-core assets and non-core markets and redeploy the proceeds to markets and assets (like the FTL Westin and the Shorebreak) with more attractive growth prospects."

La Quinta Holdings - Market Outperform

JMP reiterated its Market Outperform and raised its PT from $23 (11.2x 2015E EBITDA), to $26 (10.7x 2016E EBITDA).

  • "LQ posted $79.6M of adjusted EBITDA, topping [JMP's] $78.7M estimate and Street's $78.6M on better-than-expected RevPAR growth and margin expansion."
  • La Quinta management "established 2015 RevPAR and EBITDA guidance at 5.5-7.0% and $398-$410M, respectively."
  • "LQ remains focused on de-leveraging its balance sheet and to this end paid down $205M of debt in 2014. At year end leverage stood at 4.8x, a turn better than it was at the end of 2013."
  • JMP noted, La Quinta "has more exposure to TX than its peers, it was adamant that its exposure to energy-related corporate demand is only around 3% and that lower oil prices are more likely to help business overall."

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Latest Ratings for BEE

Dec 2015Terminates
Oct 2015DowngradesSector Perform
Sep 2015DowngradesMarket OutperformMarket Perform

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