Is Park Hotels & Resorts a good REIT to buy now?

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Park Hotels & Resorts Inc. (PACK) in Tysons, Virginia, is the second-largest publicly traded lodging REIT, with a diversified portfolio of market-leading hotels and resorts and significant underlying real estate assets. PK’s portfolio currently includes 60 premium branded hotels and resorts totaling over 33,000 rooms, the majority of which are located in downtown and resort areas.

PK reinstated its dividend after the hotel and resort real estate investment trust reported a “widespread recovery” in demand in February. The company announced that a quarterly dividend of one cent per share would be paid on April 15 to shareholders of record on March 31. The REIT reported pro forma revenue per available room (RevPAR) in February was $118.07, up 204.3% from the previous one. and 44.3% higher than January 2022, while the average daily rate of $223.63 was up 45.7% year-on-year and 9.2% higher than ADR of January. However, the stock price is down 18% over the past year and 12.3% year-to-date to close yesterday’s trading session at $16.56.

While the company has taken steps to improve its liquidity and weather the headwinds of COVID-19, hotel REITs like Park are vulnerable in these tough economic times. Although economies around the world are reopening, the process should be gradual. Travel and hotel stays will most likely take considerable time to return to anything resembling normality.

Here’s what could shape PK’s performance in the short term:

Improve finances

PK’s total revenue increased 190.3% year-over-year to $479 million for the first quarter ended March 31, 2022. Its operating profit was $1 million, compared to an operating loss of $123 million in the prior year quarter. The company’s net loss was down 70% from its value a year ago at $57 million. And its loss per share was $0.24 compared to a loss of $0.81 per share in the first quarter of 2021.

Low profitability

PK of 22.3% over 12 months Gross margin is 67.1% below the industry average of 67.7%. Its trailing 12-month operating cash flow came in at negative $22 million compared to the industry average of $206.78 million. Additionally, its trailing 12-month ROA, net profit margin, and ROC are negative at 3.4%, 18.5%, and 0.29%, respectively.

Mixed growth prospects

The Street expects PK’s revenue and EPS to grow 78% and 111.3% year-over-year, respectively, to $2.42 billion and $0.22 during the year. fiscal 2022. However, PK’s EPS is expected to decline at a CAGR of 24.2% over the next five years. Additionally, the company has failed to beat Street’s EPS estimates in two of the past four quarters.

POWR ratings reflect uncertainty

PK has an overall C rating, which equates to a neutral in our exclusive ownership POWR Rankings system. POWR ratings are calculated by considering 118 separate factors, with each factor weighted to an optimal degree.

Our proprietary scoring system also rates each stock against eight distinct categories. PK has a D rating for stability and quality. Its beta of 1.93 is in line with the stability rating. In addition, the low profitability of the company is consistent with the Quality rating.

Among the 18 stocks rated F REITs – Hotels industry, PK is ranked #11.

Beyond what I said above, we can see the PK ratings for growth, value, momentum and sentiment here.

Conclusion

While increased demand for travel and leisure should bode well for the company, several macroeconomic headwinds, particularly soaring inflation, could hurt its near-term growth. Additionally, the stock is currently trading below its 50-day and 200-day moving averages of $18.81 and $18.80, respectively, indicating bearish sentiment. We therefore believe that investors should wait before recovering its shares.

How does Park Hotel & Resorts Inc. (PK) compare to its peers?

Although PK has an overall rating of C, one might consider its industry counterpart, Megaworld Corporation (MGAWY), which has an overall rating of A (Strong Buy).


PK shares were trading at $16.40 per share on Tuesday morning, down $0.16 (-0.97%). Year-to-date, the PK is down -13.09%, compared to a -17.05% rise in the benchmark S&P 500 over the same period.

About the Author: Pragya Pandey

Pragya is an equity research analyst and financial journalist with a passion for investing. In college, she majored in finance and is currently pursuing the CFA program and is a Level II candidate. After…

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