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Service Properties Trust (SVC)
NASDAQ:SVC
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Service Properties
(NASDAQ:SVC)
Rating:54Neutral
Price Target:
$2.50
▲(7.76%Upside)
Service Properties (SVC) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$391.59M
Dividend Yield9.91%
Average Volume (3M)1.67M
Price to Earnings (P/E)―
Beta (1Y)1.21
Revenue Growth0.78%
EPS Growth-128.16%
CountryUS
EmployeesN/A
SectorReal Estate
Sector Strength68
IndustryREIT - Hotel & Motel
Share Statistics
EPS (TTM)-0.70
Shares Outstanding166,636,140
10 Day Avg. Volume1,225,150
30 Day Avg. Volume1,666,779
Financial Highlights & Ratios
PEG Ratio0.09
Price to Book (P/B)0.39
Price to Sales (P/S)0.00
P/FCF Ratio2.40
Enterprise Value/Market Cap15.07
Enterprise Value/Revenue0.78
Enterprise Value/Gross Profit8.47
Enterprise Value/Ebitda2.62
Forecast
1Y Price Target
$2.50Price Target Upside7.76% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering2
Service Properties Business Overview & Revenue Model
Company DescriptionService Properties Trust (SVC) is a real estate investment trust (REIT) that primarily engages in the ownership and leasing of service-oriented properties in the United States. The company focuses on two main sectors: hotels and net lease service and necessity-based retail properties. SVC's portfolio is diversified across various geographic locations and includes a wide range of brands and operators.
How the Company Makes MoneyService Properties Trust generates revenue primarily through leasing its properties to tenants, including hotel operators and retail businesses. The company's income is largely derived from rental payments under long-term lease agreements and management contracts with hotel operators. A significant portion of its earnings comes from its hotel properties, which are managed by well-known hotel brands under management agreements that typically include base and incentive management fees. Additionally, SVC benefits from stable cash flows from its net lease properties, which are subject to long-term, triple-net lease agreements where tenants are responsible for most property-related expenses. The company's strategic partnerships with leading hotel operators and its focus on service-oriented properties are key factors contributing to its financial performance.
Service Properties Earnings Call Summary
Earnings Call Date:May 06, 2025
(Q1-2025)
| % Change Since: 12.08%|
Next Earnings Date:Aug 06, 2025
Earnings Call Sentiment Neutral
The earnings call presented a mixed picture. While there were notable achievements in terms of RevPAR growth and successful strategic asset dispositions, challenges such as declines in adjusted hotel EBITDA, RevPAR softening, and financial impacts from decreased interest expenses also prevailed. The balanced nature of the highlights and lowlights suggests a neutral outlook for the company.Q1-2025 Updates
Positive Updates
Comparable RevPAR Growth
RevPAR grew 2.6% year-over-year within the lodging portfolio, outpacing the industry by 40 basis points despite revenue displacement from renovation activity.
Select Service Portfolio Performance
The select service portfolio produced exceptional growth with RevPAR up 10.6% year-over-year, driven by a 15% occupancy rise and 2.7% improvement in ADR at recently renovated Hyatt Place hotels.
Successful Hotel Disposition Strategy
SVC plans to sell 125 hotels in 2025 for approximately $1.1 billion, applying an 18x multiple on hotel EBITDA of $60 million over the trailing 12 months.
Net Lease Portfolio Resilience
The net lease assets were nearly 98% leased with a weighted average lease term of eight years and provided stable cash flows with annual minimum rents of $381 million.
Net Lease Property Acquisitions
Acquired or entered agreements to acquire nine net lease properties for $33 million, with a weighted average lease term of 16 years and average cash cap rates of 7.3%.
Negative Updates
Decline in Adjusted Hotel EBITDA
Adjusted hotel EBITDA declined 20.5% year-over-year primarily due to hotel renovations, increases in labor, and higher utility costs.
RevPAR Softening
RevPAR softened as the quarter progressed, driven by a pullback in government and inbound international travel, as well as airlines reducing flight commitments.
Extended Stay Portfolio Challenges
In the extended stay portfolio, RevPAR was essentially flat as a modest increase in ADR was offset by a decline in occupancy, with significant impact from renovation activity.
Interest Expense Decrease Impact
A $10.1 million decrease in interest expense impacted financial results, contributing to a decline in normalized FFO to $0.07 per share from $0.13 per share in the prior year quarter.
Company Guidance
During the Service Properties Trust First Quarter 2025 Earnings Conference Call, the company provided several metrics and guidance regarding its performance and strategic initiatives. The first quarter saw a comparable RevPAR growth of 2.6% in their lodging portfolio despite challenges such as renovation disruptions. The company is on track to sell 123 hotels in 2025, expecting proceeds of $1.1 billion, with a significant shift towards increasing net lease retail properties. They reported a 10.6% year-over-year growth in RevPAR for their select service portfolio, driven by occupancy gains, and maintained steady operating performance in their net lease retail properties, which were 98% leased with a weighted average lease term of eight years. For the second quarter of 2025, the company projects RevPAR between $99 and $102 and adjusted hotel EBITDA between $69 million and $74 million. Additionally, they anticipate that the composition of SVC's investments will shift to 54% triple net lease and 46% lodging assets post-dispositions and acquisitions.Service Properties Financial Statement Overview
Summary
Service Properties is showing signs of revenue growth and improved operational efficiency, but profitability remains a concern with consistent net losses. The balance sheet reflects significant leverage, posing financial risk. Cash flow generation is positive but declining, highlighting the need for more sustainable cash flow management. The company faces challenges that need to be addressed to enhance financial stability and investor confidence.Income Statement
Service Properties has experienced a steady revenue growth of 1.23% from 2022 to 2023 and 1.23% from 2023 to 2024. However, the company's net income has been negative for the past several years, with a notable decline in profitability as indicated by a negative net profit margin of -14.52% in 2024. The gross profit margin has improved significantly to 100% in 2024 due to a reporting anomaly where gross profit equals total revenue, suggesting potential reporting issues. Despite these challenges, the EBIT margin has improved over time, reaching 32.82% in 2024, indicating better operational efficiency.65
Positive
Balance Sheet
The balance sheet shows some improvement in equity levels, with stockholders' equity increasing from 2023 to 2024. The debt-to-equity ratio improved drastically as total debt was reported as zero in 2024, which may be due to reporting adjustments. The equity ratio is relatively low at 11.97% in 2024, indicating high leverage and potential financial risk. The return on equity is negative, reflecting ongoing profitability challenges.58
Neutral
Cash Flow
Operating cash flow decreased significantly from 2023 to 2024, reflecting challenges in cash generation from core operations. However, free cash flow remains positive, albeit with a decline, suggesting some flexibility in managing capital expenditures. The operating cash flow to net income ratio is positive, indicating some level of operational cash generation despite net losses.62
Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 1.90B | 1.87B | 1.86B | 1.50B | 1.27B |
| Gross Profit | ||||
| 602.96M | 632.29M | 635.65M | 484.84M | 567.35M |
| EBIT | ||||
| 190.93M | 253.30M | 180.34M | -69.56M | 2.85M |
| EBITDA | ||||
| 555.83M | 664.80M | 581.45M | 286.05M | 501.76M |
| Net Income Common Stockholders | ||||
| -275.53M | -32.78M | -135.24M | -543.66M | -301.47M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 143.48M | 180.12M | 38.37M | 944.04M | 73.33M |
| Total Assets | ||||
| 7.12B | 7.36B | 7.49B | 9.15B | 8.69B |
| Total Debt | ||||
| 5.71B | 5.52B | 5.66B | 7.14B | 6.21B |
| Net Debt | ||||
| 5.57B | 5.34B | 5.62B | 6.20B | 6.14B |
| Total Liabilities | ||||
| 6.27B | 6.13B | 6.10B | 7.60B | 6.58B |
| Stockholders Equity | ||||
| 851.87M | 1.23B | 1.39B | 1.56B | 2.10B |
| Cash Flow | Free Cash Flow | |||
| 139.39M | 485.55M | 293.55M | 151.23M | -152.43M |
| Operating Cash Flow | ||||
| 139.39M | 485.55M | 243.13M | 49.90M | 37.60M |
| Investing Cash Flow | ||||
| -222.86M | -29.58M | 397.25M | -101.31M | -51.81M |
| Financing Cash Flow | ||||
| 43.02M | -303.56M | -1.54B | 907.37M | 24.40M |
Service Properties Technical Analysis
Neutral
2.32
Price Trends
2.17
Positive
2.42
Negative
3.05
Negative
Market Momentum
0.06
Negative
62.75
Neutral
89.25
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For SVC, the sentiment is Neutral. The current price of 2.32 is above the 20-day moving average (MA) of 2.15, above the 50-day MA of 2.17, and below the 200-day MA of 3.05, indicating a neutral trend. The MACD of 0.06 indicates Negative momentum. The RSI at 62.75 is Neutral, neither overbought nor oversold. The STOCH value of 89.25 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for SVC.
Service Properties Risk Analysis
Service Properties disclosed 58 risk factors in its most recent earnings report. Service Properties 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 2 New Risks
1.
Our quarterly cash distribution rate on our common shares is currently $0.01 per common share and future distributions may remain at this level for an indefinite period or be eliminated and the form of payment could change. Q4, 2024
2.
RMR is incorporating AI into some of its business workflows and processes, and challenges with properly managing its use could result in reputational harm, competitive harm, legal liability, and increased regulatory costs and could adversely affect our results of operations. Q4, 2024
Service Properties Peers Comparison
Overall Rating
UnderperformOutperform
Sector (61)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
73 Outperform | $351.71M | 123.78 | 1.42% | 4.18% | 1.75% | ― | |
69 Neutral | $1.21B | 54.60 | 1.83% | 4.09% | 3.57% | 12.66% | |
68 Neutral | $563.88M | 35.35 | 4.45% | 7.27% | -1.86% | ― | |
64 Neutral | $1.11B | 27.96 | 2.92% | 7.53% | 2.82% | -8.08% | |
62 Neutral | $1.10B | ― | -0.33% | 0.43% | 2.18% | 56.00% | |
61 Neutral | $2.81B | 10.77 | 0.50% | 8507.81% | 5.69% | -20.85% | |
54 Neutral | $391.59M | ― | -33.91% | 9.91% | 0.78% | -128.16% |
* Real Estate Sector Average
Performance Comparison
SVC
Service Properties
2.32
-2.83
-54.95%
INN
Summit Hotel Properties
4.38
-1.46
-25.00%
PEB
Pebblebrook Hotel
9.18
-5.20
-36.16%
CLDT
Chatham Lodging
7.13
-1.27
-15.12%
RLJ
RLJ Lodging
7.30
-2.17
-22.91%
XHR
Xenia Hotels & Resorts
12.23
-1.80
-12.83%
Service Properties Corporate Events
Executive/Board ChangesM&A TransactionsBusiness Operations and StrategyFinancial Disclosures
Service Properties Trust Announces Strategic Portfolio Optimization
Positive
Mar 12, 2025
On March 12, 2025, Service Properties Trust announced its strategic initiatives aimed at optimizing its portfolio and financial position. The company reported a 4.2% growth in comparable Hotel RevPAR in Q4 2024 and completed the sale of eight hotels and three net lease properties for $51.1 million. Service Properties Trust plans to sell an additional 115 hotels, expecting to generate approximately $1.1 billion in proceeds, which will be used to address its 2026 debt maturities. The company also completed renovations at 28 hotels and appointed Chris Bilotto as President and CEO.
Executive/Board Changes
Service Properties Appoints Christopher Bilotto as CEO
Positive
Mar 10, 2025
On March 10, 2025, Service Properties appointed Christopher J. Bilotto as Managing Trustee, President, and CEO, succeeding John G. Murray and Todd W. Hargreaves. Mr. Bilotto, previously an executive at The RMR Group LLC, brings extensive experience in asset management and property development, enhancing the company’s leadership and strategic direction.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
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.