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On Tuesday, Citi analysts adjusted their valuation of Park Hotels & Resorts (NYSE:PK) shares, reducing the price target from $18.00 to $16.00, while still holding a positive Buy rating on the stock. The revision comes as the analysts update their model for Park Hotels & Resorts, taking into account the actual financial results for the fourth quarter and the full year of 2024, as well as updated projections for operating metrics, Revenue Per Available Room (RevPAR), and interest rates.
The new estimates foresee a decrease in 2025 expected EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) to $645 million from the previously projected $666 million, compared to the current trailing twelve-month EBITDA of $606 million. The company, with a market capitalization of $2.37 billion, currently trades at an EV/EBITDA multiple of 11.07x and offers a significant dividend yield of 11.94%. Despite this dip in EBITDA, a significant reduction in estimated interest expenses and several other minor adjustments are anticipated to largely counterbalance the impact on operating Funds From Operations (FFO). Consequently, the first quarter of 2025 operating FFO is now estimated at $0.45, marking an increase from the earlier forecast of $0.41. For the full year 2025, the operating FFO projection has been slightly raised to $2.10 from $2.09.
The analysts cited heightened economic uncertainty and reduced clarity around revenue growth as the primary reasons for revising the valuation. The new price target is set at 11 times the forecasted forward EBITDA, which aligns with the stock’s longer-term average trading multiples. This adjustment reflects a more conservative stance on multiple expansion compared to the current multiple of 9.3 times, which is at the lower end of the stock’s historical trading range.
Park Hotels & Resorts, a real estate investment trust, has faced various challenges in the hospitality industry, including fluctuating interest rates and economic conditions that influence consumer and business travel behavior. The updated financial model by Citi reflects these industry dynamics and sets a cautious yet optimistic outlook for the company’s financial performance in the coming year.
In other recent news, Park Hotels & Resorts Inc . reported its fourth-quarter 2024 earnings, significantly exceeding Wall Street expectations. The company achieved an earnings per share (EPS) of $0.32, surpassing the forecasted $0.07, and posted revenue of $625 million, beating the expected $610.3 million. Additionally, Park Hotels & Resorts is undergoing substantial renovations, including a $100 million project at the Royal Palm Resort in Miami. Looking ahead, the company projects a RevPAR growth of 0-3% for 2025 and anticipates adjusted EBITDA between $610 million and $670 million. Analyst discussions during the earnings call highlighted the company’s strategic focus on asset sales and refinancing strategies for future debt maturities. Park Hotels & Resorts also plans to target $300-$400 million in non-core asset sales in 2025. Despite the strong earnings performance, the market reaction was muted, with only a slight increase in the stock price.
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