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Diamondrock (DRH)
NASDAQ:DRH
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Diamondrock
(NASDAQ:DRH)
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Rating:64Neutral
Price Target:
$10.50
▲(4.58% Upside)
Action:ReiteratedDate:02/28/26
The score is driven primarily by a solid financial recovery and strong cash generation, supported by constructive price trends. Offsetting factors include elevated valuation (high P/E) and still-cyclical, uneven fundamentals, while the latest earnings call points to modest 2026 growth with notable near-term demand and cost headwinds.
Positive Factors
Cash generation
Consistent positive operating cash flow and a return to material free cash flow provide durable internal funding for dividends, targeted CapEx, and buybacks. Strong FCF conversion (~67% of net income) reduces reliance on external financing and enhances financial resilience across business cycles.
Balance-sheet flexibility
A materially de-levered capital structure and the absence of near-term maturities materially lower refinancing and interest-rate risk, giving management optionality to recycle capital, repurchase shares, or absorb demand shocks. This step-change supports longer-term stability and strategic flexibility.
Renovation-driven outperformance
Targeted renovations have produced outsized RevPAR and EBITDA gains, showing high ROI on capital projects. A measured multi-year CapEx plan below peers allows reallocation to high-return asset upgrades, supporting sustained margin expansion and competitive repositioning across core urban and resort assets.
Negative Factors
Revenue volatility
A pronounced revenue collapse in the most recent annual period underscores the cyclical sensitivity of lodging cash flows. Such volatility impairs predictability of FFO and dividend coverage, complicates multi-year planning, and increases the chance that capital allocation or payouts must be adjusted if demand weakens again.
Segment bifurcation
Widening performance gaps between higher-rate and lower-rate assets create uneven portfolio returns and require differentiated strategies. This polarization reduces diversification benefits, raises the risk that underperforming assets drag consolidated margins, and increases execution complexity for capital deployment.
Labor & demand headwinds
Rising labor costs combined with near-term flat RevPAR compress operating margins and limit upside to FFO and free cash flow. Recurrent wage pressure and booking cadence sensitivity make margin improvement harder to sustain, increasing the risk that cost inflation offsets gains from renovations or revenue recovery.
Diamondrock (DRH) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$2.06B
Dividend Yield5.13%
Average Volume (3M)3.07M
Price to Earnings (P/E)38.5
Beta (1Y)0.80
Revenue Growth0.95%
EPS Growth-8.40%
CountryUS
Employees31
SectorReal Estate
Sector Strength53
IndustryREIT - Hotel & Motel
Share Statistics
EPS (TTM)0.12
Shares Outstanding203,703,190
10 Day Avg. Volume2,916,839
30 Day Avg. Volume3,068,709
Financial Highlights & Ratios
PEG Ratio0.14
Price to Book (P/B)1.28
Price to Sales (P/S)1.65
P/FCF Ratio11.40
Enterprise Value/Market Cap1.50
Enterprise Value/Revenue2.75
Enterprise Value/Gross Profit6.05
Enterprise Value/Ebitda12.81
Forecast
1Y Price Target
$10.31Price Target Upside2.64% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering11
EPS Forecast (FY)0.5
Revenue Forecast (FY)$1.15B
Diamondrock Business Overview & Revenue Model
Company DescriptionDiamondRock Hospitality Company is a self-advised real estate investment trust (REIT) that is an owner of a leading portfolio of geographically diversified hotels concentrated in top gateway markets and destination resort locations. The Company owns 31 premium quality hotels with over 10,000 rooms. The Company has strategically positioned its hotels to be operated both under leading global brand families as well as unique boutique hotels in the lifestyle segment.
How the Company Makes MoneyDiamondRock generates revenue primarily through the operations of its hotel properties, which include room rentals, food and beverage services, and other ancillary services provided to guests. The company's revenue model is primarily based on the rental income from hotel rooms, which is influenced by occupancy rates and average daily rates (ADR). Additionally, DRH benefits from management fees and incentives when properties exceed performance benchmarks. The company often enters into long-term management agreements with leading hotel operators, which not only enhances its operational capabilities but also aligns its interests with those of its partners. Furthermore, through strategic acquisitions and renovations of properties, DiamondRock seeks to increase the overall value of its portfolio, thereby contributing to its revenue growth.
Diamondrock Earnings Call Summary
Earnings Call Date:Feb 26, 2026
(Q4-2025)
| % Change Since: |
Next Earnings Date:Apr 30, 2026
Earnings Call Sentiment Positive
The call portrayed a company with clear operational and capital allocation strengths: record FFO, free cash flow growth, margin expansion, disciplined lower-percentage CapEx, successful renovations driving outsized returns, and a simplified balance sheet. These highlights outweigh near-term operating headwinds including a modest Q4 RevPAR decline, group demand softness, resort-specific disruptions, and expected labor cost increases. Guidance is measured and the firm emphasizes converting top-line performance into FFO/free cash flow growth. While there are identifiable near-term risks (first-quarter comps, booking shocks, and segment bifurcation), the strategic positioning and balance-sheet actions support a constructive outlook.Q4-2025 Updates
Positive Updates
Record FFO and Strong Free Cash Flow
Full-year 2025 adjusted FFO per share of $1.08 (company record) and free cash flow per share of $0.69, a 6% increase over 2024 and a 22% increase versus 2023.
Robust Full-Year EBITDA
Corporate adjusted EBITDA for full-year 2025 of $297.6 million and fourth-quarter corporate adjusted EBITDA of $71.9 million.
Outperformance from Renovations
Renovated assets drove meaningful gains: Kimpton Palomar Phoenix saw nearly 20% EBITDA improvement and a 15-point RevPAR index gain by December; L’Auberge integration produced ~15% RevPAR growth and >25% EBITDA growth post-renovation.
Out-of-Room Spend Resilience
Total out-of-room RevPAR increased 0.6% in Q4, outperforming RevPAR by ~90 bps; resort out-of-room revenue per occupied room rose nearly 7% (strongest quarterly growth of 2025).
Food & Beverage Strength and Margin Expansion
Food & beverage revenue rose 1.4% (banquets & catering up >2%, outlets up 0.5%) with F&B margins expanding 120 bps and food & beverage profits increasing over 5% despite modest revenue growth.
Expense Discipline and Margin Improvement
Total hotel operating expenses declined 0.5% in Q4, driving an 82 bps expansion in hotel EBITDA margin; wages & benefits increased just 0.6% in the quarter, reflecting productivity gains.
Simplified, Flexible Balance Sheet
Redeemed Series A preferred shares; no secured debt or off-balance-sheet encumbrances; three fully prepayable term loans; no debt maturities until 2029 (with extension options); 70% of debt floating (incl. swaps). Preferred redemption yields a $0.03 tailwind to 2026 FFO per share.
Capital Allocation and Shareholder Returns
Repurchased 4.8 million common shares in 2025 at an average $7.72/share; paid $0.80 quarterly common dividend (plus $0.04 Q4 stub) representing a 33% FFO payout; 2026 dividend guidance of $0.90 per quarter and continued focus on buybacks when attractive.
Measured Five-Year CapEx Plan
Announced CapEx program of 7%–9% of revenues (~$80M–$100M/year) vs. peer average 10%–11% — expected to redirect >$100M (cumulative) or ~$0.50 per share to higher-return uses over five years.
2026 Guidance with Modest Growth Expected
Guidance calls for 2026 RevPAR growth of 1%–3% (total RevPAR ~25 bps higher), adjusted EBITDA $287M–$302M, and midpoint-implied ~4% increase in free cash flow per share; 2026 CapEx expected $80M–$90M.
Negative Updates
Q4 RevPAR Softness and Occupancy Pressure
Comparable RevPAR declined 30 basis points in Q4 2025; occupancy fell 130 basis points year-over-year while ADR rose only 1.6%.
Group and Leisure Weakness
Group revenue declined ~1% in the quarter; group room revenues down 1.1% (rates +2.6% but room nights -3.6%); leisure transient revenue declined 2.5%.
Resort RevPAR Decline and Renovation Disruption
Resort RevPAR declined 1.8% in Q4 (total RevPAR +1.1%); performance negatively impacted by renovation displacement at Havana Cabana and below-average snowfall in Vail affecting the Hyatt.
Challenging Q4 Comparable and Government Shutdown Impact
Q4 was the most difficult comp of the year (2024 RevPAR growth of 5.4%) and experienced disruption from a 43-day federal government shutdown that weighed on November bookings and short-term group pickups.
Segment Bifurcation Increasing
Widening performance gap between higher-rate (> $300) and lower-rate (< $300) assets: a 580 bps RevPAR growth spread and a 1,230 bps EBITDA growth spread, indicating increased polarization in demand.
Near-Term Booking/Cadence Headwinds
First quarter 2026 expected to be the toughest comp and essentially flat RevPAR; early-year cancellations from East Coast storms, limited ski-market snowfall, and a slow start in Chicago are pressuring Q1 pace.
Labor Cost Pressure Ahead
Labor & benefits expected to rise around 3% in 2026 (midpoint of guidance), with New York contract renewals contributing incremental pressure despite productivity gains in 2025.
Unclear / Potentially Confusing Guidance Detail
Transcript contains an inconsistent FFO per share guidance range (quoted as "$1.90 to $1.06"), creating ambiguity for modeling; company also notes Q1 EBITDA/FFO as a % of full year will be lower, signaling front-loaded weakness.
Potential Net Seller Stance and Market Uncertainty
Management indicated DiamondRock is increasingly likely to be a net seller in 2026 as it evaluates capital recycling; acquisition opportunities remain selective and the company sees shares as an attractive use of capital — signaling limited deal-driven upside near-term.
Company Guidance
On guidance, management expects 2026 RevPAR growth of 1%–3% (total RevPAR ~25 bps higher), adjusted EBITDA of $287M–$302M, FFO per share roughly $1.06–$1.90, and capital expenditures of $80M–$90M; they said the midpoint implies ~2% RevPAR and about a 4% increase in both FFO and free cash flow per share, Q1 RevPAR should be essentially flat (with Q1 EBITDA and FFO as a % of the year below 2025), and they plan to declare quarterly dividends of $0.90 per share (with a potential Q4 stub). Management also noted $149M of group room revenue on the books (flat vs. 2025), the Series A preferred redemption will be ~+$0.03 to 2026 FFO, the balance sheet has no maturities until 2029 and ~70% floating-rate debt, and the company continues to target disciplined capital recycling and share repurchases where accretive.Diamondrock Financial Statement Overview
Summary
Post-downturn recovery is evident with positive net income (2022–2025) and solid EBITDA margins (low-to-mid 20%s), and cash generation is strong with positive operating cash flow and positive free cash flow in 2025. Offsetting this, results remain volatile and cyclical, highlighted by a sharp 2025 annual revenue decline and a leverage picture that changed abruptly (reported 2025 debt at zero vs. meaningful leverage prior years), which warrants caution.Income Statement
Profitability has largely recovered versus the 2020–2021 losses, with net income positive from 2022–2025 and net margin improving to ~8.2% in 2025 (annual) from ~4.3% in 2024. EBITDA margins have been solid (low-20%s to mid-20%s in 2022–2025). The key weakness is growth and consistency: revenue fell sharply in 2025 (annual) (~-40% year over year) after modest growth in 2023–2024, and earlier years show high volatility typical of hotel demand cycles.62
Positive
Balance Sheet
Leverage was meaningful through 2020–2024 (debt-to-equity roughly ~0.67–0.82), which can amplify earnings swings in a cyclical lodging REIT. Return on equity is modest in the profitable years (about ~3.0% in 2024 and ~5.3% in 2023), improving to ~6.3% in 2025 (annual). A notable positive is that 2025 (annual) shows total debt reported as zero and debt-to-equity at 0.0, which—if accurate—materially strengthens the capital profile; however, it is a major step-change versus prior years and warrants caution when interpreting the trend.55
Neutral
Cash Flow
Cash generation is a relative strength: operating cash flow is consistently positive from 2022–2025 (annual), and free cash flow turned positive after 2022’s negative year. In 2025 (annual), free cash flow was ~$162M and operating cash flow ~$244M, with free cash flow equaling about ~67% of net income—healthy conversion. The main weakness is volatility: 2022 had negative free cash flow, and 2020–2021 showed sharply negative operating and free cash flow, indicating sensitivity to downturn conditions.68
Positive
| Breakdown | TTM | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 1.13B | 1.12B | 1.13B | 1.07B | 1.00B | 567.13M |
| Gross Profit | 510.71M | 0.00 | 617.94M | 293.11M | 569.14M | 282.14M |
| EBITDA | 241.19M | 276.62M | 228.90M | 263.33M | 260.85M | -52.13M |
| Net Income | 63.97M | 91.62M | 48.05M | 86.34M | 109.33M | -194.58M |
Balance Sheet | ||||||
| Total Assets | 3.15B | 3.00B | 3.17B | 3.24B | 3.21B | 2.97B |
| Cash, Cash Equivalents and Short-Term Investments | 145.34M | 68.08M | 81.38M | 121.59M | 67.56M | 38.62M |
| Total Debt | 1.19B | 0.00 | 1.18B | 1.29B | 1.30B | 1.18B |
| Total Liabilities | 1.57B | 1.55B | 1.57B | 1.59B | 1.61B | 1.44B |
| Stockholders Equity | 1.57B | 1.45B | 1.59B | 1.64B | 1.59B | 1.52B |
Cash Flow | ||||||
| Free Cash Flow | 136.87M | 162.09M | 142.82M | 118.55M | -43.36M | -276.07M |
| Operating Cash Flow | 251.52M | 243.65M | 224.41M | 237.56M | 206.24M | -2.31M |
| Investing Cash Flow | -25.63M | 7.46M | -112.12M | -120.85M | -248.60M | -62.20M |
| Financing Cash Flow | -150.26M | -276.68M | -150.67M | -56.73M | 74.03M | 5.17M |
Diamondrock Technical Analysis
Positive
10.04
Price Trends
9.46
Positive
8.93
Positive
8.39
Positive
Market Momentum
0.21
Negative
58.98
Neutral
67.80
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For DRH, the sentiment is Positive. The current price of 10.04 is above the 20-day moving average (MA) of 9.78, above the 50-day MA of 9.46, and above the 200-day MA of 8.39, indicating a bullish trend. The MACD of 0.21 indicates Negative momentum. The RSI at 58.98 is Neutral, neither overbought nor oversold. The STOCH value of 67.80 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for DRH.
Diamondrock Risk Analysis
Diamondrock disclosed 63 risk factors in its most recent earnings report. Diamondrock reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Diamondrock Peers Comparison
UnderperformOutperform
Sector (65)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
65 Neutral | $2.17B | 12.19 | 3.79% | 4.94% | 3.15% | 1.96% | |
64 Neutral | $2.06B | 38.47 | 3.98% | 5.13% | 0.95% | -8.40% | |
63 Neutral | $2.28B | ― | -8.38% | 13.10% | -3.57% | -104.55% | |
62 Neutral | $1.76B | 1,008.70 | 0.88% | 3.98% | 3.04% | -98.77% | |
62 Neutral | $1.46B | -14.20 | -3.74% | 0.34% | 0.99% | -360.58% | |
62 Neutral | $1.22B | 166.05 | 1.49% | 7.76% | -0.58% | -83.32% | |
62 Neutral | $1.41B | 23.72 | 4.58% | 3.71% | 4.29% | 141.01% |
* Real Estate Sector Average
DRH
Diamondrock
10.04
2.06
25.80%
SHO
Sunstone Hotel
9.28
-0.90
-8.82%
PEB
Pebblebrook Hotel
12.83
0.52
4.19%
RLJ
RLJ Lodging
8.02
-0.70
-8.03%
XHR
Xenia Hotels & Resorts
15.28
2.27
17.49%
PK
Park Hotels & Resorts
11.31
-0.15
-1.30%
Diamondrock Corporate Events
Executive/Board ChangesShareholder Meetings
DiamondRock Announces Board Leadership Transition and Succession Plan
Neutral
Feb 25, 2026
DiamondRock Hospitality said on February 25, 2026, that longtime Chairman and founder William W. McCarten will retire from its board at the end of his current term, effective at the close of the April 29, 2026 annual shareholder meeting. McCarten, who has led the company for 22 years and whose decision is not due to any disagreement with management, will remain chairman until that date, after which Bruce D. Wardinski will become non-executive chairman and the board will shrink from nine to eight directors.
The leadership transition underscores continuity in governance for the hotel REIT, as Wardinski has served on DiamondRock’s board since 2013 and previously chaired three other publicly traded hotel companies. Executives highlighted McCarten’s 47-year hospitality career and his role in steering the company through shifting industry conditions, framing the handover as a planned succession aimed at sustaining long-term shareholder value.
The most recent analyst rating on (DRH) stock is a Hold with a $10.50 price target. To see the full list of analyst forecasts on Diamondrock stock, see the DRH Stock Forecast page.
Business Operations and StrategyStock Buyback
DiamondRock Highlights Strategic Focus on Shareholder Value
Positive
Dec 8, 2025
DiamondRock Hospitality Company has released a presentation intended for investor meetings, highlighting its strategic focus on capital recycling and shareholder value creation. The company has been actively managing its portfolio by repurchasing shares, optimizing renovation cycles, and reallocating investments to enhance free cash flow and shareholder returns. This approach is expected to drive long-term growth and improve the company’s competitive positioning in the hospitality industry.
The most recent analyst rating on (DRH) stock is a Buy with a $9.50 price target. To see the full list of analyst forecasts on Diamondrock stock, see the DRH Stock Forecast page.
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.