Red Lion Hotels Corporation (
reported third-quarter 2012 earnings from continuing operations
of 2 cents per share, missing the Zacks Consensus Estimate of 6
cents. However, this was ahead of the approximately breakeven
result in the year ago quarter.
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Total revenue came in at $45.4 million, ahead of the Zacks
Consensus Estimate of $44.0 million and year-ago revenue of $44.5
million. The increase was attributable to a 1.6% increase in
hotel revenue and 27.7% surge in franchise revenues, partially
offset by 25.4% dip in other revenues and 2.9% decline in
Comparable hotel revenue increased 3.6% year over year to $42.0
million. Revenue per Available Room (RevPAR) for comparable owned
and leased hotel increased 4.6% year over year to $65.99, while
RevPAR for franchised hotels upped 3.1% to $72.64.
Occupancy in owned and leased hotels increased 270 basis points
(bps) to 74.6%, but decreased 110 bps to 76.7% in franchised
hotels. Average daily rate (ADR) increased 0.9% to $88.49 for
owned and leased hotels and 4.6% to $94.76 for franchised hotels.
The company reported operating income of $2.7 million, which
increased substantially from the year-ago income of $1.8 million.
The company is focused on a long-term strategy of expanding its
franchise network. In connection with this, the company signed
three new franchise agreements for three hotels - Red Lion Hotel
Woodlake Conference Center Sacramento, Red Lion Inn & Suites
Cathedral City and Red Lion Inn & Suites Denver Airport.
In the reported quarter, Red Lion sold two previously owned
hotels ??? Red Lion Colonial Hotel in Helena, Montana and Red
Lion Hotel Denver Southeast ??? for $5.6 million and 13.0 million
respectively to the franchise. Along with these, the company also
sold California-based Red Lion Hotel Sacramento at Arden Village
hotel for $9.0 million in the quarter.
As of September 30, 2012, Red Lion's system wide portfolio
consisted of 47 hotels, comprising 8,872 rooms and around 443,587
square feet of meeting space.
Red Lion ended the third quarter with cash and cash equivalents
of $14.1 million and total outstanding debt of $89.3 million. It
had $10.0 million available under revolving credit facility.
The company increased its RevPAR for owned and leased hotels
guidance and now expects it to increase in the range of 3% - 5%,
up from the previous range of 2% - 4%. Red Lion affirmed its
investment for capital improvement expense guidance and continues
to expect it be around $10.0 million.
We remain bullish on the stock, given the company's significant
portfolio restructuring activity, expansions in core markets as
well as system wide RevPAR and occupancy growth. Based on these
positives, we expect analysts to increase their estimates in the
coming days. Currently the Zacks Consensus Estimate for 2012 and
2013 is pegged at loss of 27 cents and loss of 15 cents,
Red Lion competes with the likes of
Starwood Hotels & Resorts Worldwide Inc. (
, which reported its third quarter 2012 adjusted earnings of 58
cents per share, surpassing the Zacks Consensus Estimate by 5
Red Lion currently carries a Zacks #3 Rank, implying a short-term
Hold rating. We also reiterate our long-term Neutral
recommendation on the stock.