Service Properties Disappoints With 4Q Revenues, FFO Loss

Service Properties Trust posted disappointing 4Q results, wherein it reported an FFO (Funds From Operation) loss per share. Moreover, revenues fell short of analysts’ estimates. Shares of the real estate investment trust fell about 2% in Friday’s extended trading session.

Service Properties (SVC) posted a FFO loss of $0.14 per share, compared to the prior-year period’s FFO earnings of $0.92 per share. Analysts were anticipating FFO earnings of $0.10 per share. Moreover, adjusted EBITDA for real estate (EBITDAre) declined 71.4% year-over-year to $65 million reflecting the negative impact of the COVID-19 pandemic.

Revenues declined 53.5% year-over-year to just over $270 million and missed the Street’s estimates of $286.5 million. 4Q comparable hotel RevPAR (revenue per available room) of $35.08 fell 59.2% year-over-year, while comparable hotel occupancy decreased to 40.4% in the current quarter from 69.9% in the year-ago period.

The company’s CEO, John Murray, said, “Rent collections from our retail net lease tenants were stable at 95.3% for the fourth quarter, up from a low of 80.5% for April 2020, and anchored by our largest tenant, TravelCenters of America, which continues to benefit from healthy trucking activity and its importance to the nation’s supply chain.” (See Service Properties stock analysis on TipRanks)

On Feb. 1, B.Riley Financial analyst Bryan Maher upgraded the stock to Buy from Hold, and maintained a price target of $14 (9% upside potential). In a note to investors, the analyst said that he believes the company is well-positioned for the second half of 2021 and 2022, and the recent pullback in the shares should be a good buying level.

Turning now to the rest of the Wall Street community, SVC has a Moderate Buy consensus rating based on 1 Buy and 1 Hold. The average analyst price target of $13.50 implies about 5% upside potential from current levels. Shares have declined around 35% over the past 12 months.