DiamondRock Hospitality Company
) shares have been rising since its strong second quarter 2012
report, which included a 33.3% year-over-year jump in funds from
operations (FFO). Moreover, with an improving hotels industry and
strong upward estimate revisions, the stock is now a Zacks #1 Rank
(Strong Buy). This hotel REIT (real estate investment trust) has an
impressive P/B multiple of 1.07, making it a true value stock.
Strong First Quarter
On July 25, DiamondRock Hospitality reported second quarter 2012
FFO of 20 cents per share, in line with the Zacks Consensus
Estimate but up from the year-ago FFO of 15 cents. Adjusted funds
from operations (FFO) came in at $34.2 million, surpassing the
year-ago level by 33.6%.
Total revenue jumped 23.6% year over year to $185.5 million.
Adjusted EBITDA increased 17.0% year over year to $48.1 million.
Pro forma RevPAR (revenue per available room) rose 5.8% to $139.98,
primarily due to a 4.6% rise in the average daily rate to $177.9.
DiamondRock Hospitality paid a cash dividend of 8 cents per share
in the second quarter of 2012. The current dividend payment affirms
a solid yield of 3.4%.
DiamondRock has also completed transactions worth more than $750
million over the past year, including the acquisition of four
hotels from Blackstone Real Estate Partners for $495 million.
Based on healthy second quarter results, management raised the
adjusted EBITDA guidance to between $193 million and $201 million
from the earlier range of $177 million to $186 million. The
adjusted FFO per share projection has also increased to between 76
cents and 80 cents from the previous expectation of 73 cents to 77
Earnings Estimate Moving Higher
Over the last 7 days, the Zacks Consensus Estimate for 2012
increased 1.3% to 78 cents per share with six of eleven estimates
revised upward. This implies a year-over-year growth of 25.2%. For
2013, the Zacks Consensus Estimate is 88 cents per share, marking
an upswing of 3.5% over the last 30 days and suggesting a
year-over-year rise of 13.9%.
Apart from a low P/B ratio, DiamondRock Hospitality's P/E ratio of
12.24 reflects significant value opportunity (A P/E ratio under
15.0 and P/B ratio below 3.0 generally indicate value). On a
forward P/E and P/B basis, DiamondRock Hospitality is also trading
at a discount to the industry average of 15.43x and 2.18x,
Based in Bethesda, Maryland, DiamondRock Hospitality owns,
acquires, and invests in upscale hotels under the Hilton, Marriott
and Westin brand across the U.S. The property portfolio of the
company includes 27 hotels with over 11,900 rooms. The company
currently has a market cap of $1.60 billion.
DIAMONDROCK HOS (DRH): Free Stock Analysis
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