FBR Capital Cuts Price Target on Chatham Lodging Trust (CLDT) to $22 Following Company Update
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FBR Capital maintained a Market Perform rating on Chatham Lodging Trust (NYSE: CLDT), and cut the price target to $22.00 (from $23.00), following the company's updated outlook. The update shows that CLDT is expecting weak 3Q16 results, mainly driven by a 21% RevPAR decline across six hotels. Management will host its 3Q16 earnings call at 10 a.m. November 3, and we will be hosting a meeting with management at NAREIT on November 16 at 2 p.m.
Analyst Bryan Maher commented, "On October 10, Chatham updated its outlook to include weaker-than-expected 3Q16 results, mainly driven by a 21% RevPAR decline across six hotels that it owns in Houston and western Pennsylvania (energy-related submarkets). While disappointing, these were key reasons why we downgraded the shares several months ago. We were concerned that a lack of visibility related to Chatham's growth outlook—outside of a few expansion projects near Silicon Valley—coupled with exposure to deteriorating Houston, would lead to an inability of the shares to push higher near term. Importantly, while we have for the past year acknowledged the aging lodging cycle and decelerating RevPAR growth, we think investors can still make money in the sector by being selective in their lodging ownership. For instance, 3Q16 RevPAR trends, industrywide and on a tough comparable (+5.9%), have been solid. July was up 2.5%, August was up 2.1%, and the trailing-four-week period to October 1 (essentially September) was up 4.4%. This would suggest overall industry RevPAR of around 3.0% in 3Q16 versus Chatham's just released –2.1% RevPAR. We are maintaining our Market Perform rating on Chatham."
Shares of Chatham Lodging Trust closed at $18.82 yesterday.
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