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Park Hotels & Resorts Inc PK

Morningstar Rating
$16.78 +0.20 (1.21%)
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Company Report

Park Hotels Earnings: Modest Occupancy and Rate Growth Lead to Solid Fourth-Quarter Results

Park Hotels and Resorts reported fourth-quarter earnings that were better than we anticipated, leading us to reaffirm our $26.50 fair value estimate for the no-moat company. Occupancy increased 150 basis points year over year to 71.0% in the fourth quarter, though that is still below the 79.6% figure reported in the fourth quarter of 2019. Average daily rate only grew 1.9%, but that is an improvement over the decline reported in the past two quarters. Combined, revenue per available room, or revPAR, grew 4.1%, relatively in line with our estimate of 3.8% growth, and is now 2.5% higher than the fourth quarter of 2019. However, hotel operating expenses increased an even higher 5.9%, leading to hotel EBITDA margins falling 80 basis points to 27.5% and hotel EBITDA only growing 2.1% in the fourth quarter. While funds from operations, or FFO, came in at just $0.28 per share in the fourth quarter, adjusted FFO was $0.52 when the company accounts for the one-time interest expense penalty and tax expense associated with the company’s exit from the Hilton San Francisco hotels, which was higher than our $0.44 estimate.

Price vs Fair Value

PK is trading at a 37% discount.
Price
$16.60
Fair Value
$17.40
Uncertainty
High
1-Star Price
$21.64
5-Star Price
$71.90
Economic Moat
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Capital Allocation
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Bulls Say, Bears Say

Bulls

Potentially accelerating economic growth may prolong a robust hotel cycle and benefit Park’s portfolio and performance.

Bears

Significant new supply throughout several of Park’s core markets and a rising interest rate environment will pressure the firm’s performance and valuation.

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News

Trading Information

Previous Close Price
$16.58
Day Range
$16.7516.90
52-Week Range
$10.7117.37
Bid/Ask
$16.78 / $16.79
Market Cap
$3.53 Bil
Volume/Avg
17 / 3.4 Mil

Key Statistics

Price/Earnings (Normalized)
29.59
Price/Sales
1.32
Dividend Yield (Trailing)
8.31%
Dividend Yield (Forward)
6.02%
Total Yield
13.74%

Company Profile

Park Hotels & Resorts owns upper-upscale and luxury hotels with 26,373 rooms across 41 hotels in the United States. Park also has interests through joint ventures in another 2,656 rooms in four U.S. hotels. Park was spun out of narrow-moat Hilton Worldwide Holdings at the start of 2017, so most of the company's hotels are still under Hilton brands. The company has sold all its international hotels and many of its lower-quality U.S. hotels to focus on high-quality assets in domestic gateway markets.
Sector
Real Estate
Industry
REIT - Hotel & Motel
Stock Style Box
Small Core
Total Number of Employees
91

Competitors

Valuation

Metric
PK
AVB
PEB
Price/Earnings (Normalized)
29.5936.12
Price/Book Value
0.912.130.69
Price/Sales
1.329.061.36
Price/Cash Flow
8.5916.267.89
Price/Earnings
PK
AVB
PEB

Financial Strength

Metric
PK
AVB
PEB
Quick Ratio
2.040.570.29
Current Ratio
2.330.760.30
Interest Coverage
0.695.560.32
Quick Ratio
PK
AVB
PEB

Profitability

Metric
PK
AVB
PEB
Return on Assets (Normalized)
1.27%4.86%0.64%
Return on Equity (Normalized)
2.89%8.64%1.34%
Return on Invested Capital (Normalized)
3.22%6.08%2.18%
Return on Assets
PK
AVB
PEB
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