Whitbread Shares Upgraded at Bernstein With ‘Easier H2 Comps Ahead’

Whitbread (LON: WTB) shares rallied more than 3% Thursday after analysts at Bernstein raised their rating for the stock to Outperform from Market Perform, noting that the stock is at a record low price to earnings.

“This is not a wholesale change of view,” said the firm. “We continue to see Whitbread a relatively low ROCE stock and we are not changing our view on property upside. However, the stock is at a record low PE having fallen 22% YTD and is at a record low PE, now <12x for 12% EPS growth.”

The Premier Inn owner's shares are down around 19.6% so far this year and over 14% over the last 12 months. It currently trades around the 2,937p a share mark. Bernstein raised its target for the stock to 3,300p, up from 3,140p.

The firm expects that a potential guidance downgrade is priced in but notes that RevPAR has stabilised since the company's last report.

“Easier H2 comps are ahead and cost will be helped by slowing inflation -we expect holding the full-year view will be taken well,” they add.

Furthermore, Bernstein expressed a renewed appreciation for the product, which they say is “comfortably the best-reviewed hotel brand in its price point.” As a result, Bernstein feels this both provides a moat in the UK and an increased belief that international opportunities could follow for Whitbread.

Earlier this month, analysts at Jefferies lowered the price target for Whitbread shares to 3,900p from 4,000p per share, maintaining a Buy rating on the stock. The firm told investors that UK industry data indicated the second quarter should come in softer than Whitbread's initial expectations, although they believe catalysts should arrive towards the end of the year.