Chesapeake Lodging Trust
(
CHSP
) has been steadily climbing since October 2011 when the industry
was mired with incessant fears of a double-dip recession. With a
first quarter positive FFO/share surprise of 46.2% and expected
year-over-year earnings growth of 49.7% this fiscal year,
Chesapeake looks like a solid growth stock.
This hotel REIT (real estate investment trust) presently has a
Zacks #2 Rank (Buy).
Strong First Quarter
On May 1, 2012, Chesapeake reported strong first quarter results
with a 109.6% year-over-year growth in total revenue to $50.3
million.
Adjusted FFO/share jumped 171.4% year-over-year to 19 cents,
exceeding the Zacks Consensus Estimate by 6 cents. Adjusted EBITDA
surged by a phenomenal 269.2% year-over-year to $9.6 million, while
pro forma RevPAR (revenue per available room) increased 12.2% to
$123.22, exceeding the U.S. industry-wide RevPAR growth by a broad
margin of 430 basis points.
With focused asset management efforts and accretive acquisitions,
Chesapeake increased its dividend payout for the first quarter by
10% to 22 cents per share, or 88 cents on an annualized basis.
Fiscal Outlook Raised
Chesapeake raised its 2012 adjusted FFO/share guidance to $1.60 -
$1.69 from the earlier range of $1.55 - $1.64. Adjusted hotel
EBITDA is presently expected in the range of $83.2 million - $86.7
million compared with the earlier projection of $82.3 million -
$85.6 million. Pro forma RevPAR for 2012 is expected to grow in the
range of 7.5% - 9.0% compared with the earlier expectation of 6.5%
- 8.5%.
Surge in Earnings Estimate Revisions
Over the past 60 days, the Zacks Consensus Estimate for 2012
increased 3.1% to $1.66, while the outlook for 2013 advanced 5.2%
to $2.03. The 2012 earnings estimate is on the higher end of the
company's guidance range.
Reasonable Valuation
Chesapeake's valuation looks reasonable on a price-to-earnings
(P/E) and price-to-book (P/B) basis. Shares of Chesapeake are
currently trading at a forward P/E of 10.65x, a 5.2% discount to
the peer group average of 11.24x. On a P/B basis, Chesapeake is
currently trading at 1.11x versus 1.19x for the peer group. Shares
also look pretty impressive with a ROE of 1.9%, which is better
than the peer group average of 0.9%.
Chart Resonates Growth Potential
Since December 20, 2011, Chesapeake shares have consistently fared
relatively better than the simple moving average for 200 days or
SMA (200). The year-to-date return for the stock is noteworthy at
14.55% compared to a S&P tally of 6.92%.
Chesapeake owns luxury and upper-upscale hotels in some of the most
desirable locations in the U.S. such as Boston, San Francisco, and
Seattle. The company specifically focuses on owning and acquiring
upscale hotels at prices well below replacement costs, with
attractive return on investments and significant upside potential.
Chesapeake currently owns 12 hotels with an aggregate of 3,516
rooms in 6 states in the U.S. and the District of Columbia. The
company presently has a market cap of $568.97 million.
CHESAPEAKE LODG (CHSP): Free Stock Analysis
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