Park Hotels & Resorts Inc. (PK - Free Report) is slated to report first-quarter 2020 earnings on May 11, before the bell. The company’s quarterly results will likely display declines in both revenues and funds from operations (FFO) per share.
In the last reported quarter, this Tysons, VA-based lodging real estate investment trust (REIT) reported a positive surprise of 4.35% with respect to FFO per share. Results reflected better-than-expected growth in revenues.
Over the preceding four quarters, the company surpassed estimates on one occasion, met in another and missed in the other two, the average negative surprise being 0.53%. The graph below depicts this surprise history:
Let’s see how things have shaped up for this announcement.
Factors to Consider
The coronavirus pandemic continues to wreak havoc, hitting the travel, airline, lodging and tourism, and event industries hard. It has resulted in a declining lodging demand as states have imposed travel restrictions and mandatory stay-at-home orders to curb the spread, and meetings and conferences have been called off. As a result, business travelers are grounded, while leisure travelers are scared to go on an outing.
Particularly, March was characterized by a significant decrease in demand and occupancy, and this trend is expected to continue in the near term. In fact, per a report from CBRE Group (CBRE - Free Report) , in the first quarter, hotel demand was down 14.2% nationally, and specifically 41.2% in March, while supply growth remained at 2%.
National occupancy was down 15.9% year over year to 51.8% in the first quarter and particularly plunged to 39.4% in March. Average daily rate (ADR) slid 4% and revenue per available room (RevPAR) fell 19.3%, year on year, marking the sharpest drop since the peak of the Great Recession in second-quarter 2009. The decrease in occupancy has been the largest for the luxury and upper upscale hotels, and the least for economy and mid-scale hotels, per the CBRE report.
Park Hotels too has not been spared and withdrew its outlook for the ongoing year on Mar 9, as it experienced a substantial increase in the number of corporate group cancellations. The company specifically witnessed a substantial rise in expected lost room revenues from group customer cancellations, which, as of Mar 9, climbed to roughly $30 million, with the majority affecting in March and April. Nevertheless, the company is focused on implementing cost-containment strategies across its portfolio.
The Zacks Consensus Estimate for Park Hotels’ first-quarter revenues is presently pinned at $599.4 million, suggesting a 9.1% decrease year over year. Revenues from room are estimated to be $366 million, suggesting a decline of 26.8% sequentially, while revenues from food and beverage are projected at $162 million, indicating a 22.5% decrease during the same time frame.
Moreover, the estimate revision trends reflect an unfavorable outlook. In a month’s time, the Zacks Consensus Estimate of FFO per share moved 18.6% downward to 35 cents. The figure calls for a year-over-year plunge of 47.8%.
Here is what our quantitative model predicts:
Our proven model does not conclusively predict a positive surprise in terms of FFO per share for Park Hotels this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of a FFO beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Park Hotels currently carries a Zacks Rank #3 and has an Earnings ESP of -4.83%.
Stocks That Warrant a Look
CBL Properties (CBL - Free Report) , slated to release earnings results on May 18, currently has an Earnings ESP of +11.11% and carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
VEREIT, Inc. (VER - Free Report) , set to report quarterly numbers on May 20, currently has an Earnings ESP of +5.15% and carries a Zacks Rank of 3.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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