Pebblebrook Hotel Trust (NYSE:PEB) is shaping up to be the most profitable of lodging REITs, as the company is expected to have sector-leading revenue growth, 10% EBITDA growth and up to 20% earnings growth over the next couple of years, says Rod Petrik, Analyst at Stifel Nicolaus & Co., Inc.
"My favorite company is Pebblebrook. I think that they have one of the best portfolios. Their RevPAR is second only to Strategic (NYSE:BEE). From a profitability standpoint, I might argue they have the best. I think they have the best management team, and I think they are relentless in their asset management," Petrik said.
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Petrik expects PEB to lead the sector in revenue growth in the next couple of years, and as the company continues to improve margins it will also see significant EBITDA and earnings growth, with an estimated $35 a share replacement cost.
"If the industry forecasts are 4% to 7% RevPAR, I think they'd run at 1 point, 1.5 points higher than that. They continue to improve margins. I would expect EBITDA growth to be close to 10%, and I would expect earnings growth to be 15% to 20%. Our estimated replacement cost for Pebblebrook is, say, $35 a share, and in prior cycles, particularly in 2007 and 1998, it wasn't uncommon that your higher-quality companies traded on top of the replacement cost, and I believe that Pebblebrook will be one of the first companies to get to that level," Petrik said.
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