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Is a Beat in the Offing for Host Hotels' (HST) Q2 Earnings?

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Host Hotels & Resorts, Inc. (HST - Free Report) is scheduled to release second-quarter 2021 earnings on Aug 3, after market close. The company’s quarterly results will likely mirror year-over-year growth in revenues and funds from operations (FFO) per share.

In the previous quarter, this Bethesda, MD-based lodging real estate investment trust (REIT) came up with better-than-expected results. While the company achieved hotel-level profitability for the first time since the onset of the pandemic, revenue per available room (RevPAR) witnessed a substantial year-over-year fall.

Over the trailing four quarters, the company surpassed estimates on three occasions and met in the other, the average beat being 61.19%. The graph below depicts this surprise history:

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

Factors to Consider

The acceleration in vaccine distribution and favorable holiday travel trends have led to the recovery of hotel occupancy. The relaxation of the pandemic-related restrictions and the reopening of hotels have enabled hotel operators to resume operations.

Driven by the above-mentioned favorable factors, Host Hotel prioritized projects in those assets and markets that are anticipated to recover faster like leisure and drive-to destinations. This might have helped it capture additional revenues during the economic recovery.

As for Host Hotels, 81 of its 82 hotels were open as of May 19. This, along with a recovery in the leisure demand in specific drive-to leisure markets and Sunbelt regions, has enabled the hotel REIT to witness a gradual improvement in occupancy and RevPAR.

The company enjoys a strong Sunbelt exposure and presence in 20 top U.S. markets. Also, Host Hotels’ large property sizes are expected to have aided its hotels to capture the budding demand, while addressing social-distancing measures. These are likely to have supported the hotel REIT’s recovery in the second quarter.

Besides, the company achieved hotel-level profitability for the first time since the onset of the pandemic during first-quarter 2021. The same trend is likely to have continued in the June-end quarter, in turn, bolstering revenues.

Given a strong balance-sheet position, the company has made significant acquisition of high-quality properties over the past years, which have scope for long-term growth. During the quarter under review, Host Hotels announced the acquisition of a fee-simple interest in the 444-room Four Seasons Resort Orlando at Walt Disney World Resort for around $610 million in cash.

With continued cost-containment and prudent expense-management efforts, the company is likely to have preserved liquidity. Such efforts include the reduction of hotel operating costs, redefining its operating model, and the suspension of dividend payments and stock repurchases.

However, since business travelers account for the majority of transient demand at its hotels, constrained business transient and group travel demand amid the pandemic might have affected the company’s second-quarter performance.

Here is what our quantitative model predicts:

Host Hotels has the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an FFO 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 +118.9%.

Zacks Rank: Host Hotels currently carries a Zacks Rank #3.

Q2 Earnings & Revenue Projections

The Zacks Consensus Estimate for Host Hotels’ second-quarter revenues is presently pegged at $606.4 million, suggesting a 488.8% year-over-year jump.

Prior to the second-quarter earnings release, Host Hotels’ activities were adequate to gain adequate analyst confidence. The Zacks Consensus Estimate for quarterly FFO per share has been revised 33.3% upward to 4 cents over the past week. It suggests a year-over-year surge of 115.4%.

Other Stocks That Warrant a Look

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

National Storage Affiliates Trust (NSA - Free Report) , slated to release earnings figures on Aug 3, has an Earnings ESP of +2.14% and carries a Zacks Rank of 2 (Buy), currently. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Public Storage (PSA - Free Report) , set to report quarterly numbers on Aug 3, currently has an Earnings ESP of +0.89% and holds a Zacks Rank of 3.

Healthcare Trust of America, Inc. (HTA - Free Report) , slated to release earnings numbers on Aug 5, has an Earnings ESP of +1.89% and carries 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.