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Host Hotels (HST) Up 11.2% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Host Hotels (HST - Free Report) . Shares have added about 11.2% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Host Hotels due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Host Hotels Q4 Revenues Top Estimates, RevPAR Declines

Host Hotels reported fourth-quarter 2020 adjusted FFO per share of negative 2 cents. The Zacks Consensus Estimate for the same was pegged at negative 21 cents. Notably, the company reported adjusted FFO per share of 41 cents in the prior-year quarter.

It generated total revenues of $267 million, which beat the Zacks Consensus Estimate of 236.4 million. The top line, however, declined 80% year over year.
Results were affected by a decline in travel and restrictions amid the coronavirus pandemic. In fact, RevPAR witnessed a significant decline.

For 2020, the company’s adjusted FFO per share came in at negative 17 cents. The Zacks Consensus Estimate for the same was negative 36 cents. In the prior year, the company reported adjusted FFO per share of $1.78. Total revenues of $1.6 billion slid 70.4% year over year.

Behind the Headlines

In the fourth quarter, all owned-hotel pro-forma RevPAR (on a constant-dollar basis) fell 79.9% year over year to $61.49. All owned-hotel pro-forma EBITDA was negative $62 million for the fourth quarter. The company reported EBITDA of $361 million in the prior-year quarter.

Demand during the December-end quarter was primarily driven by drive-to and resort destinations. As of the fourth-quarter end, room revenues from the transient business were $126 million, indicating a year-over-year plunge of 74.9%. Room revenues from group and contract businesses declined 91% and 63.6% year over year to $24 million and $12 million, respectively.

Moreover, room nights for its transient, group and contract business declined 70.1%, 86% and 47.1%, respectively, from the prior-year quarter. Notably, the company’s transient, group and contract businesses accounted for roughly 64%, 30% and 6%, respectively, of its 2020 room sales.

Balance Sheet Position

Host Hotels exited the fourth quarter with liquidity of $2.5 billion, including cash and cash equivalents of $2.3 billion, and FF&E escrow reserves of $139 million. As of the same date, its debt balance amounted to $5.5 billion. The company has no maturities until 2023.

Capital Expenditure

In 2020, the company invested around $499 million in capital expenditure. Of this, $343 million was return on investment capital projects spend, and $156 million was renewal and replacement project expenditure.

Remarkably, for 2021, the company now guided capital expenditure spending of $375-$475 million.

Outlook

Noting that leisure demand is seasonally weaker in the first quarter relative to the fourth quarter, the company expects average hotel level operating loss of $30-$35 million per month for first-quarter 2021, excluding any one-time credits received by its hotels in the quarter.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted -23.78% due to these changes.

VGM Scores

At this time, Host Hotels has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Host Hotels has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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