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Chatham Lodging (CLDT) Shares Dip on Q3 RevPAR Declines


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Shares of Chatham Lodging Trust (CLDT - Snapshot Report) have witnessed around a 4.9% decline over the past two days. Shares fell after the company declared a drop in its RevPAR (revenue per available room) in third-quarter 2016 and cut in its projections.

The company now estimates third-quarter adjusted funds from operations (FFO) per share of 70–71 cents, adjusted EBITDA of $37.0–$37.5 million and RevPAR decline of 2.1%. It had earlier expected adjusted FFO per share in the range of 72–75 cents, adjusted EBITDA of $38.0–$39.5 million and RevPAR growth of -1.0 to +1.0% for the quarter.

This lodging real estate investment trust (REIT) blamed lower GDP growth for this adverse impact on RevPAR. Poor GDP growth has been preventing business travels. Moreover, the company also attributed new supply and reduced demand in oil-industry influenced markets, like Houston and western Pennsylvania, for this weak RevPAR performance. Its six hotels in these markets have experienced a 21% plunge in RevPAR, affecting the company’s RevPAR by about 200 basis points.
Along with weak RevPAR performance, the company also faced increased wage pressures and mounting guest acquisition expenses, mainly from online travel agency commissions. All these factors led to the cut in the projections for adjusted EBITDA and FFO per share.

Notably, Chatham Lodging Trust is slated to release its third-quarter results before the market opens on Nov 3. The Zacks Consensus Estimate for the third-quarter FFO per share is currently pegged at 71 cents, which reflects a decline of 6.6% from a year ago. Moreover, the company presently has a Zacks Rank #4 (Sell).

However, investors interested in the REIT industry can also consider stocks like Arbor Realty Trust Inc. (ABR - Snapshot Report) , Crown Castle International Corp. (CCI - Analyst Report) and InfraREIT, Inc. (HIFR - Snapshot Report) . All of them have a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Arbor Realty Trust has exceeded estimates in three out of the trailing four quarters with an average surprise of 32.33% while Crown Castle has witnessed an upward revision of 2 cents over the past two months, in its 2016 estimate, to $4.45. On the other hand, InfraREIT has a long-term expected growth rate of 10% against the industry average of 5.8%.

Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income. All EPS numbers presented in this write up represent FFO per share.

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