Host Hotels (HST) Up 4.8% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Host Hotels (HST). Shares have added about 4.8% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Host Hotels 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 & Revenues, Doubles Dividend

Host Hotels & Resorts came out with better-than-anticipated first-quarter 2022 results in terms of adjusted FFO per share and revenues, mainly driven by leisure travel with strong rates at resort properties. Additionally, urban markets witnessed improvements with group revenues increasing sequentially.

The hotel REIT reported an adjusted FFO per share of 39 cents, surpassing the Zacks Consensus Estimate of 26 cents. HST had reported adjusted FFO per share of 1 cent in the prior-year quarter.
Host Hotels generated total revenues of $1.07 billion, beating the Zacks Consensus Estimate of $948 million. The top line also improved significantly from the prior-year quarter’s $399 million.

Backed by acceleration in lodging recovery, HST also announced doubling of its quarterly dividend.

Subsequently, Host Hotels sold the Sheraton New York Times Square Hotel for $373 million. This includes a $250 million bridge loan provided by the company to the buyer, with an initial term of six months and three potential six-month extensions.

Behind the Headlines

During the first quarter, demand continued to rise backed by leisure travel at drive-to and resort destinations. Host Hotels’ RevPAR was $166.9 million in the reported quarter, depicting a more than double increase from the prior quarter.

All owned-hotel pro-forma EBITDA was $330 million, surging from $49 million reported a year ago. However, when compared with first-quarter 2019, it fell 17.7%.

On a year-over-year basis, the average occupancy percentage increased to 54.6% from 28.5% while average room rate improved to $305.6 from $253.9, marking a 20.4% rise.

The room revenues from the transient business were $432 million, marking a marginal rise of 1.4% from the prior quarter. However, it registered a fall of 3.2% from the revenues recognized in the same period in 2019.

Room revenues from group segment increased 33.3% to $184 million sequentially. However, it declined 39.2% from the first-quarter 2019 levels.
The room revenues for contract businesses remained unchanged at $21 million sequentially. When compared with first-quarter 2019 levels, it fell 12.7%.

Moreover, room nights for HST’s transient segment declined 1.4% to $1278 from the prior quarter and 19.1% from first-quarter 2019 levels. For the group business, room nights increased 14% to $682 quarter over quarter while it declined 42% from the same-period levels in 2019. The contract business witnessed a fall of 1.6% in room nights from the prior quarter and 1.4% from the first-quarter level of 2019.

Balance-Sheet Position

Host Hotels exited first-quarter 2022 with cash and cash equivalents of $266 million, down from $807 million as of Dec 31, 2021.

HST’s liquidity totaled $1.9 billion, including FF&E escrow reserves of $163 million for the same period. It had $1.5 billion available under the revolver portion of the credit facility. As of the same date, HST’s debt balance amounted to $4.2 billion with an average maturity of 5.3 years and average interest rate of 3.4%. It has no significant maturities until 2024.

Capital Expenditure

During the first quarter, Host Hotels had incurred around $122 million of capital expenditure. Of this, $83 million was return on investment projects spend, and $39 million was renewal and replacement project expenditure.

Guidance

HST expects all owned hotel (pro forma) RevPAR in the range $195-$205 million for the second quarter. Adjusted EBITDAre is estimated between $375 million and $410 million.

For full-year 2022, management expects to incur capital expenditure of $500-$600 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

The consensus estimate has shifted 26.35% due to these changes.

VGM Scores

At this time, Host Hotels has a great Growth Score of A, a grade with the same score on the momentum front. However, 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Host Hotels has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Host Hotels is part of the Zacks REIT and Equity Trust - Other industry. Over the past month, Duke Realty (DRE), a stock from the same industry, has gained 5.4%. The company reported its results for the quarter ended March 2022 more than a month ago.

Duke Realty reported revenues of $278.16 million in the last reported quarter, representing a year-over-year change of +7.7%. EPS of $0.72 for the same period compares with $0.39 a year ago.

Duke Realty is expected to post earnings of $0.48 per share for the current quarter, representing a year-over-year change of +9.1%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.5%.

Duke Realty has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Host Hotels & Resorts, Inc. (HST) : Free Stock Analysis Report
 
Duke Realty Corporation (DRE) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.