Back to top

Image: Shutterstock

Is it Worth Adding Host Hotels (HST) to Your Portfolio Now?

Read MoreHide Full Article

Host Hotels & Resorts Inc.’s (HST - Free Report) portfolio of luxury and upper-upscale hotels in the United States and abroad, strategic acquisitions and capital-recycling efforts position it well for growth.

Host Hotels’ portfolio primarily comprises upscale hotels across the top 22 lucrative U.S. markets, with a strong presence in the Sunbelt region.

With the lodging industry resuming its operations in full swing, HST’s well-located properties in markets with strong demand drivers like central business districts of main cities, close to airports and in resort/conference destinations are likely to benefit.

Host Hotels has been undertaking strategic capital allocations to enhance the quality of its portfolio and capitalize on the greater scale and competitive advantage that the markets in the United States offer.

Moreover, Host Hotels’ capital recycling efforts are encouraging. Over the years, HST has been disposing of its non-strategic assets that have maximized their value and utilizing the proceeds for acquiring or investing in premium properties in markets that are anticipated to recover faster, like leisure and drive-to destinations. Such efforts highlight the company’s prudent capital-management practices.

Host Hotels has been broadening its acquisition focus to include urban markets beyond the top 25 to enhance its portfolio’s earnings before interest, taxes, depreciation and amortization (EBITDA) and revenues. These efforts bode well for its long-term growth.

HST maintains a healthy balance sheet with no material debt maturities until January 2024. As of Jun 30, 2022, the company had $2.4 billion in total available liquidity. Moreover, it is the only company with an investment-grade rating among lodging REITs. This financial flexibility will aid capital deployment for long-term growth opportunities and facilitate redevelopment activities.

Analysts seem bullish on this Zacks Rank #2 (Buy) stock. The Zacks Consensus Estimate for the company’s 2022 funds from operations (FFO) per share indicates a favorable outlook for HST as it has moved marginally upward in the past week to $1.80.

The stock has gained 13.7% in the quarter-to-date period against the industry’s fall of 1.6%. 

Zacks Investment Research
Image Source: Zacks Investment Research

However, with a cautious approach by many businesses and employees, the recovery of transient business and group travel is likely to be sluggish in the near term due to a delayed return to the office and limited face-to-face conferences.

The spike in online short-term rentals has escalated the supply in the lodging industry, leading to increased competition in some markets.

Interest rate hikes are likely to affect HST’s ability to purchase or develop real estate. Its dividend payout might become less attractive than the yields on fixed-income and money market accounts.

Other Stocks to Consider

Some other top-ranked stocks from the REIT sector are Prologis (PLD - Free Report) , Extra Space Storage (EXR - Free Report) and Xenia Hotels & Resorts (XHR - Free Report) , each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.

The Zacks Consensus Estimate for Prologis’ 2022 FFO per share has moved marginally upward in the past two months to $5.17.

The Zacks Consensus Estimate for Extra Space Storage’s current-year FFO per share has moved 2.4% northward in the past two months to $8.46.

The Zacks Consensus Estimate for Xenia Hotels & Resorts’ ongoing year’s FFO per share has been raised 3.2% over the past month to $1.59.

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.

Published in