Will This Price Target Cut Hurt DiamondRock Hospitality (DRH) Stock Today?

NEW YORK (TheStreet) -- DiamondRock Hospitality (DRH) stock has had its price target decreased to $14 from $15, JMP Securities said Tuesday. A "market outperform" rating was reiterated.

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TheStreet Ratings team rates DIAMONDROCK HOSPITALITY CO as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate DIAMONDROCK HOSPITALITY CO (DRH) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, reasonable valuation levels, solid stock price performance and notable return on equity. We feel these strengths outweigh the fact that the company shows weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 77.8% when compared to the same quarter one year prior, rising from $16.63 million to $29.56 million.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • DIAMONDROCK HOSPITALITY CO has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, DIAMONDROCK HOSPITALITY CO turned its bottom line around by earning $0.12 versus -$0.08 in the prior year. This year, the market expects an improvement in earnings ($0.32 versus $0.12).
  • The revenue fell significantly faster than the industry average of 9.8%. Since the same quarter one year prior, revenues fell by 23.7%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
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