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1. Company Snapshot

1.a. Company Description

Sunstone Hotel Investors, Inc.is a lodging real estate investment trust ("REIT") that as of the date of this release has interests in 19 hotels comprised of 9,997 rooms.Sunstone's business is to acquire, own, asset manage and renovate or reposition hotels considered to be Long-Term Relevant Real Estate®, the majority of which are operated under nationally recognized brands, such as Marriott, Hilton and Hyatt.

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1.b. Last Insights on SHO

Sunstone Hotel Investors' recent performance was driven by its ability to refinance its 2024 maturity, reducing debt and improving its financial flexibility. The company's Q3 2024 earnings release highlighted its efforts to manage its balance sheet, with a focus on refinancing its debt. Additionally, Sunstone's CEO, Bryan Giglia, emphasized the company's commitment to investing in its portfolio and creating long-term value for shareholders. The company's strong balance sheet and focus on long-term growth are expected to be key drivers of its future performance.

1.c. Company Highlights

2. Strong Q4 RevPAR Growth Projected Despite Government Shutdown Concerns

The company's financial performance is on track, with actual EPS coming in at $0.17, beating estimates of $0.15. Revenue growth is expected to continue, with analysts estimating a 3.9% increase next year. The total portfolio RevPAR growth is projected to be in the mid-single-digit range for the fourth quarter, driven by strong performances in key markets such as Orlando, Boston, Miami, San Francisco, and Wine Country. As Bryan Giglia mentioned, "We've seen a more favorable bookings environment, especially in some of our key markets."

Publication Date: Nov -26

📋 Highlights
  • Q4 RevPAR Growth:: Projected mid-single-digit total portfolio RevPAR growth, driven by strong performance in Orlando, Boston, Miami, and San Francisco.
  • Andaz Miami Beach Contribution:: Accounts for 450 basis points (4.5%) of Q4 RevPAR growth, with 15% RevPAR growth in San Francisco convention hotels.
  • Andaz EBITDA Outlook:: 2025 EBITDA expected between $12M–$16M, stabilizing to $18M–$20M by 2027 with strong 2026 Q1 bookings.
  • Group Bookings in 2026:: Projected low-mid single-digit growth, with 80% of 2026 room nights already booked.
  • G&A Expenses:: Full-year 2024 G&A projected at $20M–$21M, slightly higher than 2023 but aligned with 2019 levels despite inflation.

Segment Performance

The company's group business is showing nice trends, particularly in convention hotels, with San Francisco standing out as a standout performer with over 15% RevPAR growth. However, Washington, D.C. is expected to be softer due to weaker government and government-related demand. The transaction market continues to improve, with a slight rationalization in pricing, but it's still not robust, especially for larger assets.

Outlook and Guidance

The company's outlook for next year is achievable, with Andaz expected to be within the range of $12 million to $16 million EBITDA, and stabilization in '27 at the high teens to low 20 range. Group bookings are on track to cross over the year with about 80% of room nights on the books, at a low-mid single-digit pace. Wailea, a premier luxury beachfront resort, is seeing positive signs in the market.

Valuation and Metrics

The stock is trading at a P/E Ratio of 97.19, EV/EBITDA of 9.03, and a Dividend Yield of 3.85%. With a ROIC of 36.1%, the company is generating strong returns on invested capital. The Net Debt / EBITDA ratio is -0.61, indicating a net cash position. These metrics suggest that the company's strong financial performance is not entirely reflected in its valuation, leaving room for potential upside.

Operating Expenses

G&A as a percentage of revenues is expected to be between $20-21 million for the full year, slightly higher than last year due to comp formulas in 2024. However, this is comparable to 2019 levels, which feels positive given the inflationary pressures over the past few years.

3. NewsRoom

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SHO vs. NHI: Which Stock Is the Better Value Option?

Dec -01

Source: zacks.com

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Sunstone Hotel Investors, Inc. (NYSE:SHO) Given Consensus Rating of “Hold” by Analysts

Dec -01

Source: defenseworld.net

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SUNSTONE HOTEL INVESTORS ANNOUNCES EXPANSION OF BOARD OF DIRECTORS

Nov -17

Source: prnewswire.com

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Envestnet Asset Management Inc. Has $3.11 Million Stock Position in Sunstone Hotel Investors, Inc. $SHO

Nov -16

Source: defenseworld.net

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SHO or NHI: Which Is the Better Value Stock Right Now?

Nov -13

Source: zacks.com

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Sunstone Hotel Investors, Inc. (SHO) Q3 2025 Earnings Call Transcript

Nov -08

Source: seekingalpha.com

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Sunstone Hotel Investors (SHO) Tops Q3 FFO and Revenue Estimates

Nov -07

Source: zacks.com

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SUNSTONE HOTEL INVESTORS REPORTS RESULTS FOR THIRD QUARTER 2025

Nov -07

Source: prnewswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (3.18%)

6. Segments

Room

Expected Growth: 3.5%

Sunstone Hotel Investors, Inc.'s 3.5% room growth is driven by increasing demand from business and leisure travelers, improved hotel operating efficiencies, and strategic acquisitions. Additionally, the company's focus on premium-branded hotels, such as Marriott and Hilton, contributes to higher average daily rates and occupancy rates, further fueling growth.

Food and Beverage

Expected Growth: 2.8%

Sunstone Hotel Investors' Food and Beverage segment growth of 2.8% is driven by increasing average daily rates, higher occupancy rates, and a growing demand for experiential travel. Additionally, the company's focus on upscale and luxury hotels, which typically have higher food and beverage revenue per available room, contributes to the segment's growth.

Other

Expected Growth: 2.2%

Sunstone Hotel Investors' 2.2% growth is driven by increasing RevPAR (Revenue per Available Room) due to strong demand, effective asset management, and strategic capital allocation. Additionally, the company's diversified portfolio of upper-upscale and luxury hotels benefits from a favorable industry trend, contributing to its growth momentum.

7. Detailed Products

Hotel Rooms

Sunstone Hotel Investors, Inc. owns and operates a portfolio of hotels across the United States, offering a range of accommodations and amenities to guests.

Food and Beverage Services

The company's hotels offer on-site restaurants, bars, and room service, providing guests with convenient dining options.

Meeting and Event Spaces

Sunstone Hotel Investors, Inc.'s hotels feature meeting and event spaces, catering to corporate events, weddings, and other gatherings.

Amenities and Services

The company's hotels offer a range of amenities, including fitness centers, pools, and business centers, to enhance the guest experience.

8. Sunstone Hotel Investors, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Sunstone Hotel Investors, Inc. operates in the hospitality industry, which has a moderate threat of substitutes. While there are alternative accommodations such as Airbnb, they are not a significant threat to the company's business model.

Bargaining Power Of Customers

Sunstone Hotel Investors, Inc. has a diverse customer base, which reduces the bargaining power of individual customers. Additionally, the company's properties are primarily located in urban areas, making it difficult for customers to negotiate prices.

Bargaining Power Of Suppliers

Sunstone Hotel Investors, Inc. relies on various suppliers for goods and services, including food and beverage providers, linen suppliers, and maintenance contractors. While the company has some bargaining power due to its size, suppliers still have some negotiating power.

Threat Of New Entrants

The hospitality industry has high barriers to entry, including significant capital requirements and regulatory hurdles. This makes it difficult for new entrants to compete with established companies like Sunstone Hotel Investors, Inc.

Intensity Of Rivalry

The hospitality industry is highly competitive, with many established players competing for market share. Sunstone Hotel Investors, Inc. faces intense competition from other hotel operators, which can lead to pricing pressure and reduced revenue.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 27.32%
Debt Cost 6.32%
Equity Weight 72.68%
Equity Cost 10.05%
WACC 9.03%
Leverage 37.60%

11. Quality Control: Sunstone Hotel Investors, Inc. passed 1 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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RLJ Lodging

A-Score: 6.1/10

Value: 8.3

Growth: 4.7

Quality: 6.1

Yield: 8.0

Momentum: 2.5

Volatility: 7.0

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Summit Hotel Properties

A-Score: 5.8/10

Value: 7.4

Growth: 5.6

Quality: 5.5

Yield: 8.0

Momentum: 3.0

Volatility: 5.3

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DiamondRock Hospitality

A-Score: 5.7/10

Value: 5.3

Growth: 5.0

Quality: 4.9

Yield: 7.0

Momentum: 3.5

Volatility: 8.3

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Sunstone Hotel Investors

A-Score: 5.2/10

Value: 5.0

Growth: 4.1

Quality: 4.9

Yield: 6.0

Momentum: 3.5

Volatility: 7.7

1-Year Total Return ->

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Xenia Hotels & Resorts

A-Score: 5.1/10

Value: 5.5

Growth: 4.7

Quality: 3.5

Yield: 6.0

Momentum: 4.0

Volatility: 7.0

1-Year Total Return ->

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SVC

A-Score: 4.9/10

Value: 9.8

Growth: 3.2

Quality: 5.2

Yield: 6.0

Momentum: 1.5

Volatility: 3.3

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

8.93$

Current Price

8.94$

Potential

-0.00%

Expected Cash-Flows