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DiamondRock Hospitality (DRH) Q3 FFO Meet Estimates

DiamondRock Hospitality (DRH) delivered FFO and revenue surprises of 0.00% and 12.20%, respectively, for the quarter ended September 2021. Do the numbers hold clues to what lies ahead for the...

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This story originally appeared on Zacks

DiamondRock Hospitality (DRH) came out with quarterly funds from operations (FFO) of $0.10 per share, in line with the Zacks Consensus Estimate. This compares to loss of $0.22 per share a year ago. These figures are adjusted for non-recurring items.

- Zacks

A quarter ago, it was expected that this hotel and resort real estate investment trust would post a loss of $0.03 per share when it actually produced FFO of $0.05, delivering a surprise of 266.67%.

Over the last four quarters, the company has surpassed consensus FFO estimates three times.

DiamondRock Hospitality, which belongs to the Zacks REIT and Equity Trust - Other industry, posted revenues of $179.47 million for the quarter ended September 2021, surpassing the Zacks Consensus Estimate by 12.20%. This compares to year-ago revenues of $50.07 million. The company has topped consensus revenue estimates three times over the last four quarters.

The sustainability of the stock's immediate price movement based on the recently-released numbers and future FFO expectations will mostly depend on management's commentary on the earnings call.

DiamondRock Hospitality shares have added about 23.9% since the beginning of the year versus the S&P 500's gain of 24.1%.

What's Next for DiamondRock Hospitality?

While DiamondRock Hospitality has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock?

There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's FFO outlook. Not only does this include current consensus FFO expectations for the coming quarter(s), but also how these expectations have changed lately.

Empirical research shows a strong correlation between near-term stock movements and trends in estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of estimate revisions.

Ahead of this earnings release, the estimate revisions trend for DiamondRock Hospitality was favorable. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #2 (Buy) for the stock. So, the shares are expected to outperform the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how estimates for the coming quarters and current fiscal year change in the days ahead. The current consensus FFO estimate is $0.08 on $159.17 million in revenues for the coming quarter and $0.13 on $522.05 million in revenues for the current fiscal year.

Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, REIT and Equity Trust - Other is currently in the top 39% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.



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