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Host Hotels (HST) Up 12.3% Since Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Host Hotels & Resorts, Inc. (HST - Free Report) . Shares have added about 12.3% in that time frame.

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

Host Hotels Beats on Q1 FFO and Revenues, Raises View

Host Hotels & Resorts reported first-quarter 2018 adjusted FFO of 43 cents per share, which outpaced the Zacks Consensus Estimate of 41 cents. However, the adjusted FFO per share fell shy of the year-ago quarter tally of 44 cents.

Results reflect margin improvement through better productivity. However, the year-over-year decline mainly reflects increase in interest expenses and additional tax expenses. The company has also raised its outlook for full-year 2018.

The company generated total revenues of around $1.35 billion, which surpassed the Zacks Consensus Estimate of $1.33 billion, but marginally (0.1%) slipped from the year-ago tally. The year-over-year decline mainly reflects the impact of dispositions of five hotels in 2017 and in early 2018.

Notably, during the quarter, Host Hotels completed the acquisition of 301-room Andaz Maui at Wailea Resort, 668-room Grand Hyatt San Francisco and 454-room Hyatt Regency Coconut Point Resort and Spa for $1 billion.

Quarter in Details

During the reported quarter, comparable hotel revenues increased 1.5% year over year to nearly $1.3 billion. Comparable hotel revenue per available room or RevPAR (on a constant dollar basis) was up 1.7% year over year, driven by a 170 basis points (bps) expansion in occupancy, partly offset by a 0.6% decrease in average room rate. For domestic properties, comparable hotel RevPAR was up 1.6% while the same for International properties climbed 9.3%.

For the first quarter, comparable hotel EBITDA increased 3.7%. Comparable hotel EBITDA margin improved 60 bps, reflecting improvement in operating efficiencies, higher ancillary revenues and a tax rebate at one property. Finally, the company exited first-quarter 2018 with around $323 million of unrestricted cash and $511 million of available capacity remaining under the revolver part of its credit facility. In addition, as of Mar 31, 2018, total debt was $4.3 billion, having an average maturity of 4.8 years and an average interest rate of 3.9%. Notably, the company has no debt maturities until 2020.

Host Hotels did not buy back any shares in 2018. It has $500 million of capacity available under its current repurchase program.

During the first quarter, the company expended around $115 million on capital expenditures — $29 million was return on investment (ROI) capital projects, and $86 million for renewal and replacement projects.

Outlook

Host Hotels has raised its outlook for full-year 2018. The company now expects 2018 adjusted FFO per share in the range of $1.67-$1.73, denoting a 5 cents increase at the midpoint from the earlier guidance of $1.60-$1.70.

The company’s full-year projection includes comparable hotel RevPAR (constant U.S. dollar basis) growth of 1.5-2.5%, reflecting expansion of 50 bps at the midpoint. Moreover, the company continues to expect capital expenditures of $475-$550 million for the year. This comprises $185-$220 million in ROI projects, and $290-$330 million in renewal and replacement projects.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There have been seven revisions higher for the current quarter compared to one lower.

Host Hotels & Resorts, Inc. Price and Consensus

 

VGM Scores

At this time, HST has an average Growth Score of C, though it is lagging a bit on the momentum front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

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

Zacks' style scores indicate that the company's stock is suitable for value and growth investors.

Outlook

Estimates have been broadly trending upward for the stock and the magnitude of these revisions looks promising. It comes with little surprise HST has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.




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