Host Hotels (HST) Up 0.7% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Host Hotels (HST). Shares have added about 0.7% in that time frame, underperforming 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 catalysts.

Host Hotels' Q3 FFO Beats Estimates, Revenues Down Y/Y

Host Hotels reported third-quarter 2019 adjusted FFO of 35 cents per share, outpacing the Zacks Consensus Estimate of 34 cents. However, adjusted FFO per share fell 5.4% from the year-ago tally of 37 cents.

The company generated total revenues of $1.26 billion, surpassing the Zacks Consensus Estimate by 0.3%. However, the top line declined 2.8% year over year.

Results were supported by comparable hotel revenues growth. However, the dismal year-over-year performance resulted from a decline in comparable RevPAR, on a constant dollar, as well as 0.2% fall in average room rate.

Behind the Headlines

During the quarter, comparable hotel revenues inched up 1.2% year over year to $1.1 billion. Moreover, comparable hotel total RevPAR (on a constant-dollar basis) went up 1.2% year over year to $272.9 million. This upside resulted from improvement in food and beverage revenues as well as growth in other revenues.

For domestic properties, comparable hotel RevPAR (on a nominal-dollar basis) edged down 0.3%, while the same for International properties was up 3.1%.

For the September-end quarter, comparable hotel EBITDA edged down 1.7% to $289 million, while comparable hotel EBITDA margin shrunk 85 basis points (bps) to 26.5%.

Finally, the company exited third-quarter 2019 with $2 billion of unrestricted cash, not including $1.5 billion of available balance under its credit facility’s revolver and $184 million in the FF&E escrow reserve. In addition, as of Sep 30, 2019, total debt was $4.4 billion, with average maturity of 5.2 years and average interest rate of 4.1%.

Host Hotels repurchased 12.1 million shares, aggregating $200 million in third-quarter 2019. After taking into account the repurchase executed in the quarter, Host Hotels has $600 million of capacity available under its current repurchase program.

Portfolio Activity

During the reported quarter, the company sold eight non-core assets for $565 million.

Capital Investments

During the July-September period, the company witnessed around $152 million in capital expenditures, of which $89 million was ROI capital projects, and $63 million for renewal and replacement projects.

Outlook

Host Hotels has revised its adjusted FFO guidance for full-year 2019 by a cent at the mid-point. The company expects 2019 adjusted FFO per share of $1.75-$1.78, up from the $1.73-$1.78 guided earlier.

The company’s full-year projection includes comparable hotel RevPAR (constant U.S. dollar basis) growth of -1% to -0.25%. This reflects an estimated 50 bps of disruption impact due to the incremental capital expenditures associated with the Marriott transformational capital program. However, with operating profit guarantees provided by Marriott, the impact on earnings caused by these expenditures is compensated.

Additionally, the company projects capital expenditures of $550-$590 million for the year. This comprises $315-$335 million in ROI projects, and $235-$255 million in renewal and replacement projects.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -5.35% due to these changes.

VGM Scores

Currently, Host Hotels has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

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

Outlook

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

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