Back to top

Image: Bigstock

Host Hotels (HST) to Report Q1 Earnings: What's in Store?

Read MoreHide Full Article

Host Hotels & Resorts, Inc. (HST - Free Report) is slated to report first-quarter 2019 results after market close on May 1. The company’s results are anticipated to reflect year-over-year increase in revenues and funds from operations (FFO) per share.

In the last reported quarter, this Bethesda, MD-based lodging real estate investment trust (REIT) delivered a positive surprise of around 4.88% with respect to FFO per share. Results reflect improvements in room, food and beverage revenues. The company also witnessed broad productivity gains that aided profitability.

The company has a decent surprise history. It posted positive surprises in each of the trailing four quarters, the average beat being 5.34%. This is depicted in the graph below:

Let’s see how things are shaping up for this announcement.

Factors to Consider

Host Hotels has a solid portfolio of luxury and upper upscale resort, large convention center, and city center hotels across potential markets. A decent economy, better job market, healthy corporate profits, non-residential fixed investment and consumer confidence level are likely to drive business travel and leisure trips, and thereby steer the demand for the company’s properties. This is expected to be reflected in the upcoming results.

Further, Host Hotels is undertaking a strategic capital-recycling program to improve its portfolio quality and strengthen its position in the United States, where it has a greater scale and competitive advantage. The company has also made efforts to lower its international and New York exposure. Moreover, it executed transformational capital program in partnership with Marriott to completely reinvent a number of hotels.

In addition, Host Hotels’ productivity-boosting efforts are encouraging. Its March-end quarter results are expected to display improvement in productivity at many of its hotels.

The Zacks Consensus Estimate for first-quarter revenues is pegged at $1.4 billion, indicating an increase of around 3.9% from the year-ago reported figure.

However, though supply growth has been tepid in the past, it has gathered momentum in recent times. In fact, supply growth is expected to have remained elevated in the first quarter, particularly in markets where the company has exposure. This is likely to impact the company’s pricing power. Notably, it usually reaps 25-26% of its total EBITDA in the January-March quarter.

Moreover, although Host Hotels’ efforts to enhance its portfolio quality through strategic dispositions offer the company the dry powder to enhance flexibility and add properties to its portfolio, invest in existing assets, repay debt or make share repurchases, the company cannot bypass the near-term dilutive impact from asset dispositions.

Also, there was no solid catalyst during the quarter. Hence, in a month’s time, the Zacks Consensus Estimate of FFO per share remained unrevised at 45 cents. However, the figure denotes a year-over-year increase of nearly 4.7%.

Here is what our quantitative model predicts:

Host Hotels does not have the right combination of two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for Host Hotels is 0.00%.

Zacks Rank: Host Hotels has a Zacks Rank of 2 (Buy), which increases the predictive power of ESP. However, we also need a positive ESP to be confident of a positive surprise.

Stocks That Warrant a Look

Here are a few stocks in the REIT sector that you may want to consider, as our model shows that these have the right combination of elements to report a positive surprise this quarter:

Alexandria Real Estate Equities, Inc. (ARE - Free Report) , scheduled to release earnings on Apr 29, has an Earnings ESP of +0.30% and currently carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Welltower, Inc. (WELL - Free Report) , scheduled to release earnings on Apr 30, has an Earnings ESP of +0.09% and a carries a Zacks Rank of 3.

Mack-Cali Realty Corporation , slated to report first-quarter results on May 1, has an Earnings ESP of +1.63% and holds a Zacks Rank of 3.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

Zacks' Top 10 Stocks for 2019

In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?

Who wouldn't? Our annual Top 10s have beaten the market with amazing regularity. In 2018, while the market dropped -5.2%, the portfolio scored well into double-digits overall with individual stocks rising as high as +61.5%. And from 2012-2017, while the market boomed +126.3, Zacks' Top 10s reached an even more sensational +181.9%.

See Latest Stocks Today >>
 

Published in