Investments In Southern Entertainment And Opry 100 Will Tap Into The Growing Country Music Segment

Key Takeaways

• Strategic expansions and enhancements aim to boost revenue through increased corporate bookings and outside-the-room spending, improving margins.
  
• Investments in entertainment and country music segments position Ryman for future earnings growth and market opportunities.
  
• Weaker leisure demand, ongoing construction disruptions, and rising labor costs could pressure Ryman Hospitality Properties' revenue and net margins.

Catalysts

Ryman Hospitality Properties, Inc. (NYSE: RHP) is a leading lodging and hospitality real estate investment trust that specializes in upscale convention center resorts and entertainment experiences.

• Ryman's multiyear transformational capital program is anticipated to drive mid-teens unlevered returns on incremental growth investments, enhancing future revenue and shareholder value.
  
• The expansion of Gaylord Opryland and other properties aims to attract high-rated corporate group business, potentially increasing revenue and outside-the-room spending, thereby improving net margins.
  
• The group's investment in the entertainment sector, including Southern Entertainment and Opry 100 brand activations, positions Ryman to tap into the growing country music and lifestyle segment, which could boost future earnings.
  
• Ongoing renovations and expansions in properties like the Gaylord Texan are expected to accommodate more premium group bookings, contributing to future revenue growth.
  
• Ryman's strategic booking efforts have resulted in a record number of group room nights for future years, indicating a strong forward revenue potential and possibly enhancing earnings stability.

Ryman Hospitality Properties Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Ryman Hospitality Properties's revenue will grow by 5.8% annually over the next 3 years.
• Analysts assume that profit margins will increase from 11.6% today to 15.0% in 3 years time.
• Analysts expect earnings to reach $416.5 million (and earnings per share of $5.34) by about March 2028, up from $271.6 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 21.8x on those 2028 earnings, up from 20.7x today. This future PE is lower than the current PE for the US Hotel and Resort REITs industry at 24.5x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.13%, as per the Simply Wall St company report.

Ryman Hospitality Properties Future Earnings Per Share Growth

Risks

• The reported fourth quarter results were marginally below guidance due to weaker-than-expected leisure demand at some properties, indicating potential risks to revenue and earnings if leisure trends do not improve.
  
• The company expects ongoing construction disruptions to impact 2025 profitability, particularly at Gaylord Opryland, which could lead to higher costs and pressure on net margins.
  
• Economic sensitivity and changing consumer behaviors, such as trading down from overnight stays to day visits, were noted as factors affecting leisure demand, potentially impacting revenue if consumer uncertainty persists.
  
• A higher mix of lower-spending association business on the books for 2025 could lead to less outside-the-room revenue from group bookings, affecting overall net margins.
  
• Wage and labor costs continue to rise, with an increase of 3% to 4% expected in 2025, which could place additional pressure on net margins if revenue growth does not offset these cost increases.

Valuation

• The analysts have a consensus price target of $121.923 for Ryman Hospitality Properties based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $133.0, and the most bearish reporting a price target of just $100.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $2.8 billion, earnings will come to $416.5 million, and it would be trading on a PE ratio of 21.8x, assuming you use a discount rate of 8.1%.
• Given the current share price of $95.16, the analyst price target of $121.92 is 22.0% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.