Host Hotels (HST) Gains 12% in 3 Months: Will the Trend Last?
Host Hotels & Resorts, Inc. HST has a portfolio of luxury and upper-upscale hotels in the United States and abroad. With the industry rebounding in the wake of the pandemic, HST’s well-located properties in markets with strong demand drivers are benefiting.
Shares of this Bethesda, MD-based lodging real estate investment trust (REIT) have gained 12% in the past three months compared with the industry’s growth of 3.6%.
Analysts, too, seem bullish on this Zacks Rank #1 (Strong Buy) company. The Zacks Consensus Estimate for HST’s 2023 funds from operations (FFO) per share has moved 1.6% northward over the past month to $1.91. You can see the complete list of today’s Zacks #1 Rank stocks here.
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Let us discuss the factors that supported the uptick.
Host Hotels has been experiencing healthy operating performance owing to the continued momentum in leisure travel demand. Also, healthy demand from small and medium-sized businesses, representing a large share of the company’s corporate demand, has aided business transient recovery.
Given this backdrop, in the first quarter of 2023, HST’s comparable revenue per available room (RevPAR) was $217.77, climbing 31.1% from the year-ago quarter’s $166.12. The figure also improved 7.4% from the first-quarter 2019 tally. We expect comparable RevPAR to grow 9.6% year over year in 2023. For 2024 and 2025, the same is anticipated to increase 7.9% and 9.5%, respectively.
With improving industry demand-supply fundamentals, HST is likely to witness healthy operating performance in the upcoming period.
The company is focused on enhancing the quality of its portfolio. It has made significant acquisitions of high-quality properties over the past years with long-term growth prospects, supporting external growth.
Additionally, to achieve a higher portfolio EBITDA and revenues, HST has broadened its acquisition focus to include urban markets beyond the top 25 ones. These efforts augur well for its external growth. Our estimate for 2023 EBITDA suggests an increase of 9.3% year over year.
Host Hotels’ capital recycling efforts seem encouraging. Over the years, it has disposed of non-strategic assets that have lower growth potential or properties with significant capital expenditure requirements through its capital-recycling program. It redeploys the proceeds to acquire or invest in premium properties in markets that are anticipated to recover faster. From 2021 through May 23, 2023, total dispositions amounted to approximately $1.5 billion, which is 17.5 times the EBITDA multiple.
HST’s solid balance-sheet position with ample liquidity has enabled it to capitalize on growth opportunities and has facilitated redevelopment activities. As of Mar 31, 2022, the company had $2.3 billion in total available liquidity. Moreover, it is the only company with an investment-grade rating among the lodging REITs. With no material debt maturities until January 2024 and enough financial flexibility, HST is well-poised to ride the growth curve.
Further, the company’s trailing 12-month return on equity (ROE) highlights its growth potential. Its ROE is 11.83% compared with the industry’s average of 3.77%, indicating that it is more efficient in using the shareholders’ funds than its peers.
Solid dividend payouts are the biggest enticements for REIT investors, and Host Hotels has remained committed to that. The company recently rewarded its shareholders with a 25% sequential hike in its second-quarter 2023 cash dividend payment to 15 cents per share from 12 cents paid out earlier. Given the company’s improving operating fundamentals, a lower dividend payout ratio compared with the industry and a solid financial position, we expect the latest dividend rate to be sustainable.
Other Stocks to Consider
Some other top-ranked stocks from the REIT sector are Ventas VTR, Omega Healthcare Investors OHI and Ryman Hospitality Properties RHP, each carrying a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for Ventas’ current-year funds from operations (FFO) per share has moved marginally northward over the past month to $2.98.
The Zacks Consensus Estimate for Omega Healthcare’ ongoing year’s FFO per share has been raised 1.1% over the past week to $2.80.
The Zacks Consensus Estimate for Ryman Hospitality’ 2023 FFO per share has moved 1.9% upward in the past month to $7.31.
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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Host Hotels & Resorts, Inc. (HST) : Free Stock Analysis Report
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