Gaylord Entertainment Company
) have been on the upswing after an impressive first quarter
earnings surprise and a deal with the largest publicly traded U.S.
lodging chain. Valuation for this Zacks #1 Rank (Strong Buy) may
seem a bit expensive, but with excellent earnings growth
projection, this high-profile diversified hospitality and
entertainment company looks like a solid growth pick.
Coming off a Winning Quarter & Guiding Higher
Gaylord Entertainment reported first quarter 2012 earnings per
share of 12 cents on May 8, beating the Zacks Consensus Estimate by
71% and reversing last year's loss of 4 cents. The results were
driven by a greater Average Daily Rate (ADR) and outside-the-room
Consolidated cash flow (CCF) rose 24.3% year over year to $70.2
million, while CCF margins increased 410 basis points to 31.1%.
Revenue per available room (RevPAR) - a key performance metric in
the hotel industry - was up 3.8% and its total revenue per
available room (including food & beverage, and other ancillary
services) increased 4.9% compared to the first quarter of 2011.
In addition to the earnings surprise, Gaylord raised its full year
CCF and total RevPAR guidance. The company expects CCF for 2012
between $235 million and $252 million, up from the previous
guidance of $228 million to $243 million. Gaylord also raised its
total RevPAR growth expectation to a range of 3% - 6% from the
prior 2% - 5%.
Asset Sell-Off & REIT Conversion: Positive
Gaylord recently announced plans to sell the brand and management
of the company's four existing hotels for $210 million to Marriott
International Inc. (
) and then restructure as a Real Estate Investment Trust (REIT),
effective January 1, 2013. Apart from enjoying Marriott's much
higher scale advantage, Gaylord shareholders can also look forward
to a one time stock/cash dividend of its undistributed earnings and
profits by year-end, as required under REIT conversion rules.
Zacks Consensus Estimates Move Higher
The full year Zacks Consensus Estimate for 2012 is up 9 cents (or
13%) to 77 cents over the last 60 days. Next year's average
forecast is up 15 cents (or 16%) to $1.07. Given the 31 cents per
share that Gaylord earned in 2011, the projected growth rate stands
at 147% for 2012. If the company hits the target in 2013, the
annual growth rate will be 40%.
Mixed Valuation Picture
Shares of Gaylord are going for about 49 times forward estimates,
which seems a bit pricey. However, the PEG ratio of 2.46, though
seemingly overvalued, is less than the 2.58 similar companies
offer. Its price to sales ratio of 1.90 is essentially in-line with
the peer group average of 1.87. The other metric that aggressive
growth investors would look at - price to book - comes in at 1.74x,
a 9% discount to the peer group average of 1.91x.
Chart Shows Estimate Growth
Shares have been surging lately, which has led to lofty valuations.
While this may keep some investors on the sidelines, with the price
and consensus chart demonstrating incrementally increasing annual
consensus estimates each year, shares could keep climbing higher.
Nashville, Tennessee-based Gaylord Entertainment Company, through
its subsidiaries, is engaged in the business of hospitality and
entertainment. Gaylord's four key properties - upscale,
meetings-focused resorts - are located in the key regional air
transport hubs of Dallas, Orlando, Nashville and Washington, D.C.
The company's other assets include the iconic Grand Ole Opry (the
longest-running live radio program in the world), the famous Ryman
Auditorium, the General Jackson Showboat, Gaylord Springs Golf
Links and Nashville-based radio station WSM-AM.
GAYLORD ENTMT (GET): Free Stock Analysis Report
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