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Host Hotels (HST) Gains 5.8% in Three Months: Time to Buy?
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With the pandemic’s impact eroding, the lodging industry is witnessing a rebound in traffic. Consequently, the demand for Host Hotels & Resorts Inc. (HST - Free Report) luxury and upper-upscale hotels in markets with strong demand drivers, like central business districts of main cities, close to airports and in resort/conference destinations, is expected to have revived.
Shares of this Bethesda, MD-based lodging real estate investment trust (REIT) have gained 5.8% in the past three months against the industry’s decline of 16.6%.
Analysts, too, seem bullish on this Zacks Rank #2 (Buy) company. The Zacks Consensus Estimate for HST’s 2022 funds from operations (FFO) per share indicates a favorable outlook for the company as it has increased 2.9% in the past two months to $1.80.
Image Source: Zacks Investment Research
Let us decipher the factors behind the increase in the stock price despite the ongoing weakness in the broader markets.
Host Hotels has a strong presence in the Sunbelt region, where leisure travel continued to improve, leading to strong rates at resort properties. The company’s all-owned-hotel revenue per available room (RevPAR) during second-quarter 2022 almost doubled to $219.3 million year over year and rose 31.4% sequentially. It was also the first time since the onset of the pandemic that the company’s quarterly RevPAR exceeded the 2019 levels.
Moreover, many companies have started implementing a return-to-office policy, resulting in a gradual rise in business transient and group demand. This has further aided the demand for HST’s properties, especially in the Sunbelt region, where offices have begun to reopen.
HST is likely to witness healthy operating performance in the upcoming quarters, given the improvement in the lodging industry fundamentals.The company is likely to report a 40.9% year-over-year growth in revenues for third-quarter 2022. The Zacks Consensus Estimate for the same is presently pegged at $1.2 billion.
The company 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.
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.
Additionally, the company 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 solid balance-sheet position with ample liquidity and no material debt maturities until January 2024. Moreover, it is the only company with an investment-grade rating among the lodging REITs. This financial flexibility has and will continue to aid capital deployment for long-term growth opportunities and facilitate redevelopment activities.
The company’s trailing 12-month return on equity (ROE) highlights its growth potential. Its ROE is 8.86% compared with the industry’s average of 3.60%, indicating that it is more efficient in using the shareholders’ funds than its peers.
Further, with the holiday season around the corner, we anticipate that the above-mentioned factors will serve as a catalyst for Host Hotels’ performance.
The Zacks Consensus Estimate for Life Storage’s current-year FFO per share has moved 3.6% northward in the past two months to $6.39.
The Zacks Consensus Estimate for OUTFRONT Media’s ongoing year’s FFO per share has been raised 2.5% over the past two months to $2.05.
The Zacks Consensus Estimate for Xenia Hotels & Resorts’ 2022 FFO per share has moved 7.4% upward in the past two months 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.
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Host Hotels (HST) Gains 5.8% in Three Months: Time to Buy?
With the pandemic’s impact eroding, the lodging industry is witnessing a rebound in traffic. Consequently, the demand for Host Hotels & Resorts Inc. (HST - Free Report) luxury and upper-upscale hotels in markets with strong demand drivers, like central business districts of main cities, close to airports and in resort/conference destinations, is expected to have revived.
Shares of this Bethesda, MD-based lodging real estate investment trust (REIT) have gained 5.8% in the past three months against the industry’s decline of 16.6%.
Analysts, too, seem bullish on this Zacks Rank #2 (Buy) company. The Zacks Consensus Estimate for HST’s 2022 funds from operations (FFO) per share indicates a favorable outlook for the company as it has increased 2.9% in the past two months to $1.80.
Image Source: Zacks Investment Research
Let us decipher the factors behind the increase in the stock price despite the ongoing weakness in the broader markets.
Host Hotels has a strong presence in the Sunbelt region, where leisure travel continued to improve, leading to strong rates at resort properties. The company’s all-owned-hotel revenue per available room (RevPAR) during second-quarter 2022 almost doubled to $219.3 million year over year and rose 31.4% sequentially. It was also the first time since the onset of the pandemic that the company’s quarterly RevPAR exceeded the 2019 levels.
Moreover, many companies have started implementing a return-to-office policy, resulting in a gradual rise in business transient and group demand. This has further aided the demand for HST’s properties, especially in the Sunbelt region, where offices have begun to reopen.
HST is likely to witness healthy operating performance in the upcoming quarters, given the improvement in the lodging industry fundamentals.The company is likely to report a 40.9% year-over-year growth in revenues for third-quarter 2022. The Zacks Consensus Estimate for the same is presently pegged at $1.2 billion.
The company 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.
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.
Additionally, the company 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 solid balance-sheet position with ample liquidity and no material debt maturities until January 2024. Moreover, it is the only company with an investment-grade rating among the lodging REITs. This financial flexibility has and will continue to aid capital deployment for long-term growth opportunities and facilitate redevelopment activities.
The company’s trailing 12-month return on equity (ROE) highlights its growth potential. Its ROE is 8.86% compared with the industry’s average of 3.60%, indicating that it is more efficient in using the shareholders’ funds than its peers.
Further, with the holiday season around the corner, we anticipate that the above-mentioned factors will serve as a catalyst for Host Hotels’ performance.
Other Stocks to Consider
Some other top-ranked stocks from the REIT sector are Life Storage , OUTFRONT Media (OUT - Free Report) and Xenia Hotels & Resorts (XHR - Free Report) , each carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Life Storage’s current-year FFO per share has moved 3.6% northward in the past two months to $6.39.
The Zacks Consensus Estimate for OUTFRONT Media’s ongoing year’s FFO per share has been raised 2.5% over the past two months to $2.05.
The Zacks Consensus Estimate for Xenia Hotels & Resorts’ 2022 FFO per share has moved 7.4% upward in the past two months 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.