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Can Host Hotels (HST) Pull Off a Surprise in Q4 Earnings?

Zacks Equity Research
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Host Hotels & Resorts, Inc. HST is slated to report fourth-quarter 2017 results after the market closes on Feb 21.

Last quarter, this Bethesda, MD-based lodging real estate investment trust (REIT) delivered in-line performance with respect to funds from operations (FFO) per share. Over the preceding four trailing quarters, the company posted surprises in three occasions, with an average beat of 6.81%. This is depicted in the graph below:

Host Hotels & Resorts, Inc. Price and EPS Surprise

Host Hotels & Resorts, Inc. Price and EPS Surprise | Host Hotels & Resorts, Inc. Quote

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

Why a Likely Positive Surprise?

Our proven model shows that Host Hotels is likely to beat estimates because it has the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) to beat estimates, and Host Hotels has the right mix.

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

Zacks ESP: The Earnings ESP is +0.25%. This is a meaningful and leading indicator of a likely positive surprise.

Zacks Rank: Host Hotels’ Zacks Rank #3, when combined with a positive ESP, makes us reasonably confident of a positive surprise this season.

What's Driving the Better-than-Expected Earnings?

Host Hotels boasts a portfolio of upscale hotels across potential markets in the United States. Also, the company is making concerted efforts to enhance its portfolio quality through strategic capital-recycling program. The company is making well-planned redevelopments to fortify its position in vibrant markets. In addition, Host Hotels has a decent balance sheet and ample liquidity.

Also, the company’s fourth-quarter performance is anticipated to turn around with favorable impact of the holiday shift. It is likely to grow the revenue per available room (RevPAR) from its value enhancement and rebranding initiatives. The company is expected to display improvement in productivity at many of its hotels.

Amid these, the Zacks Consensus Estimate for fourth-quarter revenues is pegged at $1.35 billion, marking projected growth of 0.7% year over year. The Zacks Consensus Estimate for Room Revenues is pegged at $858 million, denoting a projected increase of 2.5% year over year, while the Food and Beverage revenues estimate is pegged at $413 million which is below $416 million reported in the prior-year quarter.

In a month’s time, the Zacks Consensus Estimate of FFO per share for the fourth quarter remained unchanged at 39 cents. The figure denotes an estimated decrease of 4.9% year over year.

Nevertheless, Host Hotels’ shares have rallied 14.4% over the past six months, outperforming the 7% loss incurred by the industry.

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:

Pebblebrook Hotel Trust PEB, slated to report quarterly numbers on Feb 22, has an Earnings ESP of +5.81% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Outfront Media Inc. OUT, scheduled to release quarterly figures on Feb 27, has an Earnings ESP of +0.90% and a Zacks Rank of 3.

Gramercy Property Trust GPT, slated to release fourth-quarter results on Feb 28, has an Earnings ESP of +2.49% and a Zacks Rank of 3.

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
Pebblebrook Hotel Trust (PEB) : Free Stock Analysis Report
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