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Host Hotels (HST) to Report Q4 Earnings: What's in Store?

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Host Hotels & Resorts, Inc. (HST - Free Report) is slated to report fourth-quarter and 2020 earnings on Feb 18, after market close. The company’s quarterly results are expected to reflect declines in revenues and funds from operations (FFO) per share.

In the last reported quarter, this Bethesda, MD-based lodging real estate investment trust (REIT) posted better-than-expected results with negative adjusted FFO per share of 11 cents, better than the Zacks Consensus Estimate of negative 21 cents. However, results were affected by year-over-year decline in travel amid the coronavirus pandemic. In fact, revenue per available room (RevPAR) witnessed significant decline.

Over the preceding four quarters, the company surpassed estimates on two occasions, missed in one and met in another, the average beat being 8.83%. The graph below depicts this surprise history:

Let’s see how things have shaped up for this announcement.

Factors to Consider

Resumption of operations at its hotels in the third quarter is likely to have enabled this hotel REIT to witness gradual improvement in fourth-quarter occupancy and RevPAR and benefit from a recovery in leisure demand.

Moreover, the company’s large property sizes are expected to have enabled its hotels to capture budding demand, while adhering to social-distancing mandates. In fact, strategic positioning of its properties might have enabled it to see a recovery in leisure demand in specific drive-to markets in the fourth quarter.

However, as COVID-19 cases surged in the back half of fourth-quarter 2020, restrictions on public gatherings, and stay-at-home mandates were imposed in certain states. This is expected to have hindered travel demand and hotel operations.

Moreover, delays or cancellation of conventions, and conferences and other large public gatherings, which are typically demand drivers at the company’s hotels, are likely to have resulted in significant year-over-year declines in fourth-quarter revenues and total RevPAR.

Further, with COVID-19 cases spiking, and various forms of lockdowns reinstated in some states, Host Hotels is likely to have seen additional group cancellations across its footprint with minimal business transient. As of Nov 4, 2020, operations remained suspended at four of its hotels.

The Zacks Consensus Estimate for fourth-quarter average daily rate (“ADR”) and RevPAR is pegged at $188 and $38.20, indicating a year-over-year decline of 20% and 79%, respectively.

These are anticipated to have marred the company’s revenues in the quarter. In fact, the Zacks Consensus Estimate for Host Hotels’ fourth-quarter revenues is presently pegged at $238.6 million, suggesting 82.1% year-over-year decline.

Also, the majority of Host Hotels’ properties are concentrated in the luxury and upper-upscale segments. During the economic downturn, these segments bore the brunt as unfavorable macroeconomic conditions led customers to shift to lower-priced brands over the company’s premium ones. Hence, significant occupancy erosion at its luxury and upper-upscale properties is expected to have marred RevPAR.

Lastly, there has been a lack of any solid catalyst that could instill optimism prior to the fourth-quarter earnings release. The Zacks Consensus Estimate for quarterly FFO per share has been unchanged at negative 36 cents over the past month. It also suggests a 120.2% year-over-year decline.

Here is what our quantitative model predicts:

Our proven model does not conclusively predict an earnings surprise in terms of FFO per share for Host Hotels this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of a FFO beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Host Hotels currently carries a Zacks Rank #3 and has an Earnings ESP of -29.4%.

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 beat their upcoming release:

American Tower Corporation (AMT - Free Report) , set to report quarterly numbers on Feb 25, currently has an Earnings ESP of +7.49% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Hudson Pacific Properties, Inc. (HPP - Free Report) , slated to release quarterly earnings on Feb 17, currently has an Earnings ESP of +0.76% and a Zacks Rank of 2.

Public Storage (PSA - Free Report) , scheduled to announce fourth-quarter results on Feb 24, has an Earnings ESP of +0.53% and a Zacks Rank of 3 at present.

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.

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