Evercore ISI Raises 2019 Estimates For Lodging Stocks, Says Environment Favorable For Sector

Evercore ISI is refining its estimates on lodging companies in the wake of first-quarter earnings reports and raised its 2019 EPS estimates across the board. 

The Analyst

Evercore ISI’s Rich Hightower.

The Ratings

• DiamondRock Hospitality Company (NYSE: DRH) was downgraded from Outperform to In-Line with a price target lowered from $12.50 to $12. (See Hightower’s track record here.)
• Hyatt Hotels Corporation (NYSE: H)’s price target was raised from $81 to $84. The analyst reiterated an In-Line rating.
• Hilton Hotels (NYSE: HLT) was upgraded from In-Line to Outperform with a price target lifted from $80 to $86.
• Host Hotels and Resorts Inc (NYSE: HST) was upgraded from In-Line to Outperform. The analyst raised the price target from $22 to $23.
• LaSalle Hotel Properties (NYSE: LHO)’s price target was raised from $32 to $34. The analyst reiterated an In-Line rating.
• Marriott International Inc (NASDAQ: MAR) was upgraded from In-Line to Outperform with a price target raised from $146 to $155.
• Pebblebrook Hotel Trust (NYSE: PEB) was upgraded from In-Line to Outperform with a price target lowered from $39 to $38. 
• Park Hotels & Resorts Inc (NYSE: PK) was maintained at Outperform with a $31 price target.
• Sunstone Hotel Investors Inc (NYSE: SHO) was upgraded from Underperform to In-Line with a  price target lifted from $15.50 to $16.50.

The Thesis

Earnings estimates and the core operating forecast through 2019 were raised for lodging companies in Evercore ISI’s coverage universe. 

“We are now in-line with or slightly above consensus estimates for 2018 and 2019 in practically every case,” Hightower said. 

Economic growth, rising interest rates and more manageable industry supply pressures are making lodging an investor favorite, the analyst said. 

The biggest risk facing lodging equities — besides an unforeseen economic downturn — is LaSalle Hotel Properties spurning Pebblebrook Hotel Trust’s purchase offer, Hightower said. Pebblebrook raised its bid for LaSalle Hotel Properties last month to $3.6 billion. The analyst is modeling a 50-percent chance LaSalle will accept the offer. 

Related Links: 

Booking Holdings’ CEO Isn’t Worried About Airbnb

Morgan Stanley Analyzes The Lodging Sector’s M&A Potential