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Will Solid Portfolio Aid Host Hotels (HST) in Q2 Earnings?

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Host Hotels & Resorts, Inc. (HST - Free Report) is slated to report second-quarter 2018 results after the market closes on Aug 7. The company’s results are anticipated to reflect year-over-year increase in funds from operations (FFO) per share and revenues.

In the last reported quarter, this Bethesda, MD-based lodging real estate investment trust (REIT) delivered a positive surprise of around 4.9%, with respect to funds from operations (FFO) per share. Results reflected margin improvement through better productivity.

The company has a decent surprise history. In fact, over the preceding four quarters, it posted positive surprises in three occasions, with an average beat of 4.8%. This is depicted in the graph below:

Host Hotels & Resorts, Inc. Price and EPS Surprise
 

Let’s see how things are shaping up for this announcement.

Factors That Might Impact Q2 Results

In the second quarter, Host Hotels is expected to have gained from its solid portfolio of upscale hotels across potential markets and strategic capital-recycling program. The lodging REIT has been making well-planned redevelopments to fortify its position in vibrant markets.

Moreover, improved business travel demand with rising short-term group and transient bookings, higher group spends, and elevated demand from the leisure division signal brighter prospects for hotel REITs. Particularly, Host Hotels’ second-quarter results are likely to reflect improved group business.

Further, the company’s productivity boosting efforts are encouraging and Host Hotels’ Q2 performance is expected to display improvement in productivity at many of its hotels. In addition, the company has a healthy balance sheet with ample liquidity that augurs well for its growth endeavors.

Amid these, the Zacks Consensus Estimate for Q2 revenues is pegged at $1.49 billion, indicating an expected year-over-year increase of 3.7%. The Zacks Consensus Estimate for Room Revenues is pegged at $958 million, significantly up from $844 million reported in the prior quarter. The Food and Beverage revenues estimate is pegged at $430 million which is above the $413 million generated in the last quarter. Notably, the company usually reaps 29-30% of its total adjusted EBITDA in the April-June quarter.

Also, the Zacks Consensus Estimate of FFO per share for the quarter to be reported is 51 cents. The figure denotes an estimated rise of 4.1% year over year.

However, there was lack of any solid catalyst and therefore, in a month’s time, this estimate remained unchanged. Furthermore, though supply growth has been sluggish in the past, it has gathered momentum, of late. In fact, growth is expected to remain elevated in 2018, particularly in markets where the company has exposure. In addition to this, dilutive impact of asset sales cannot be bypassed.

Earnings Whispers

Our proven model does not conclusively show that Host Hotels will likely beat estimates this season. This is because a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) — for this to happen. However, that is not the case here as you will see below.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The company has an Earnings ESP of 0.00%.

Zacks Rank: Host Hotels’ Zacks Rank #2 increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of a positive surprise.

Stocks That Warrant a Look

Here are a few stocks in the REIT space that you may want to consider, as our model shows that these have the right combination of elements to report a positive surprise this time around:

Bluerock Residential Growth REIT, Inc. (BRG - Free Report) , slated to release second-quarter results on Aug 7, has an Earnings ESP of +5.88% and a Zacks Rank of 3.

LaSalle Hotel Properties (LHO - Free Report) , set to report Q2 earnings on Aug 9, has an Earnings ESP of +1.11% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

National Health Investors, Inc. (NHI - Free Report) , scheduled to report its quarterly numbers on Aug 7, has an Earnings ESP of +0.15% and carries a Zacks Rank of 2.

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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