LaSalle Hotel Updates Guidance

Zacks

LaSalle Hotel Properties (LHO), a real estate investment trust (:REIT), recently updated its outlook for full year 2012 to better reflect the adverse effects of Hurricane Sandy on its business. Although the company did not report any physical damage to its properties or any casualties, the hurricane had a material impact on its operations and was likely to affect its profitability.

Based on these turn of events, LaSalle presently expects a RevPAR (revenue per available room) growth of 4.0% - 4.3% versus an earlier projection of 4.5% - 4.8%. Adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) is expected to be in the range of $259.0 million - $261.0 million, compared to earlier estimates of $263.5 million - $265.5 million.

LaSalle reduced its fiscal 2012 adjusted FFO (funds from operations) guidance to between $175.3 million and $176.3 million from the earlier range of $179.3 million - $180.3 million. On a per share basis, adjusted FFO is lowered from $2.09 - $2.10 to $2.04 - $2.05.

The current Zacks Consensus Estimate for 2012 is pegged at $2.10. Over the past 30 days, 12 out of 13 earnings estimate revisions for the current fiscal have moved down, while the Zacks Consensus Estimate dipped 1.9% to $2.10. We expect the Zacks Consensus Estimate for 2012 to reduce further in the coming days in tune with the revised earnings guidance by the company.

For 2013, the current Zacks Consensus Estimate is $2.34. Over the past 30 days, 11 out of 13 earnings estimate revisions have moved down for 2013, while the Zacks Consensus Estimate decreased 4.9% to $2.34. This further reinforces the ongoing negative investor sentiments in accordance with the devastation caused by the storm.

LaSalle owns luxury and upper-upscale hotels in high barriers-to-entry markets throughout the U.S. The company specifically focuses on owning, redeveloping and repositioning upscale full-service hotels in urban, resort and convention markets. LaSalle currently owns 10,200 guest rooms in 13 markets in 9 states in the U.S. and the District of Columbia.

We maintain our Neutral rating on the stock, which presently has a Zacks #3 Rank that translates into a short-term Hold rating. We also have a Neutral recommendation and a Zacks #3 Rank for Host Hotels & Resorts Inc. (HST), one of the competitors of LaSalle.

Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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