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Why Shares of Services Properties Trust Are Rising Today

By Bram Berkowitz – Nov 5, 2021 at 3:50PM

Key Points

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The company reported earnings results for the third quarter of 2021.

What happened

Shares of Services Properties Trust (SVC 1.17%) had risen nearly 10% as of 3:12 p.m. EDT after the real estate investment trust (REIT) reported earnings for the third quarter of 2021.

So what

Services Properties, which owns hotels and other retail properties, reported an earnings-per-share net loss of $0.36 on total revenue of more than $437 million for the third quarter of 2021. Both numbers beat analyst consensus estimates.

Normalized funds from operations were nearly $44 million in the quarter, up from $23.2 million in the third quarter of 2020. Hotel revenue per available room also grew to $67.71 in the quarter from $41.35 one year ago.

Squiggly line on chart moving upward.

Image source: Getty Images.

"With weekly COVID-19 cases on the decline, we expect to benefit from a rebound in business travel in the coming quarters, particularly at our full-service hotels as urban centers reopen," John Murray, president and CEO of Services Properties, said in a statement.

Murray added, "We collected all of the rents due from our net lease tenants during the third quarter and our largest net lease tenant, TravelCenters of America, continues to benefit from healthy trucking activity and improved operating efficiencies."

Now what

It's been a rough go for Services Properties since the coronavirus pandemic. At the beginning of the pandemic, Services Trust all but eliminated its dividend to preserve capital, which is tough for a REIT, a category of stocks known for large dividends.

Although there's likely upside here as this is a recovery play, I still view this stock as risky because dividends are one of the main draws of REITs. Also, the hotel and retail sectors may not be out of the woods just yet.

Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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