Host Hotels' (HST) Q3 FFO Tops, Occupancy Up, '23 View Raised
Shares of Host Hotels & Resorts, Inc. HST gained 2.56% in the after-hours trading session in response to better-than-anticipated third-quarter 2023 results.
Adjusted funds from operations (AFFO) per share of 41 cents outpaced the Zacks Consensus Estimate of 35 cents. Moreover, the figure increased 7.9% from the prior-year quarter.
Results reflect higher revenues driven by year-over-year occupancy growth. Per James F. Risoleo, president and CEO of the company, “Host delivered comparable hotel RevPAR growth of 1.8% over the third quarter of 2022, driven by improvements in group business, which were offset by moderating rates at our resort properties.”
Host Hotels generated total revenues of $1.214 billion, beating the Zacks Consensus Estimate of $1.208 billion. The top line rose 2.1% on a year-over-year basis.
The lodging real estate investment trust (REIT) also raised its 2023 outlook for AFFO per share.
Behind the Headlines
Host Hotels’ comparable hotel RevPAR was $201.32 in the reported quarter, climbing 1.8% from the year-ago quarter’s $197.76 and 4.4% from the third-quarter 2019 tally of $192.81. The rise was mainly backed by occupancy growth in the quarter. Also, the continued year-over-year growth in city center markets, driven by improvements in group business, offset moderating rates at the company’s resorts, leading to the overall rise.
Comparable hotel EBITDA came in at $314 million, falling 10% from $349 million reported a year ago. The figure, however, surpassed the third-quarter 2019 tally of $297 million.
The average room rate of $280.24 in the third quarter fell from $281.27 reported in the year-ago quarter. The figure, however, compared favorably with $240.91 reported in third-quarter 2019.
The comparable average occupancy percentage in the quarter was 71.8%, up 150 basis points from the prior-year quarter. However, the figure was lower than the comparable average occupancy of 80% in third-quarter 2019.
The room nights for its transient business improved 0.4% year over year. The group business and contract businesses witnessed growth of 1.8% and 20.7%, respectively, from the prior-year period. Host Hotels’ transient, group and contract businesses accounted for roughly 65%, 32% and 3% of its 2022 room sales, respectively.
Balance Sheet Position
Host Hotels exited the third quarter with cash and cash equivalents of $916 million, up from $802 million as of Jun 30, 2023.
HST’s liquidity totaled $2.6 billion, including FF&E escrow reserves of $218 million as of Sep 30, 2023. It had $1.5 billion available under the revolver portion of the credit facility as of the same date.
During the reported quarter, the company repurchased 6.3 million shares at an average price of $15.90 per share through its common share repurchase program for $100 million.
Capital Expenditure
As of Sep 30, 2023, Host Hotels’ capital expenditure aggregated $472 million. Of this, $140 million was the total return on investment project spend, $194 million was renewal and replacement expenditure, and $138 million was renewal and replacement insurable reconstruction.
2023 Outlook Up
Host Hotels raised its full-year AFFO per share guidance to the range of $1.90-$1.95 from the prior-guided range of $1.82-$1.89. This suggests a 6-cent increase at the midpoint. The Zacks Consensus Estimate is presently pegged at $1.84.
The company revised its comparable hotel RevPAR projection for the current year to $210-$213 from $210-$214 estimated earlier.
HST expects comparable hotel RevPAR growth in the band of 7.25-8.75%, revised from 7-9% stated earlier. It, however, maintained the midpoint at 8% despite the impact of the wildfires in Maui, which is expected to persist into the fourth quarter, and continued macroeconomic concerns.
The adjusted EBITDAre is now expected between $1.60 billion and $1.64 billion, up from $1.535 billion and $1.585 billion.
For 2023, management lowered its expectations for total capital expenditure in the range of $615-$695 million from $625-$725 million anticipated earlier.
Host Hotels currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Host Hotels & Resorts, Inc. Price, Consensus and EPS Surprise
Host Hotels & Resorts, Inc. price-consensus-eps-surprise-chart | Host Hotels & Resorts, Inc. Quote
Performance of Other REITs
Healthpeak Properties, Inc. PEAK reported third-quarter 2023 FFO as adjusted per share of 45 cents, beating the Zacks Consensus Estimate by a whisker. The reported figure rose 4.6% from the prior-year quarter.
Results reflected better-than-anticipated revenues. Moreover, growth in same-store portfolio cash (adjusted) net operating income was witnessed across the portfolio. PEAK also raised its outlook for the current year.
Public Storage PSA reported a third-quarter 2023 core FFO per share of $4.33, which increased 4.8% year over year and came ahead of the Zacks Consensus Estimate of $4.21.
Results reflected a better-than-anticipated top line, aided by an improvement in the realized annual rent per available square foot in the reported quarter. The company also benefited from its expansion efforts through acquisitions, developments and extensions. PSA also raised its 2023 outlook.
Equinix Inc.’s EQIX third-quarter 2023 AFFO per share of $8.19 surpassed the Zacks Consensus Estimate of $7.79. The figure improved nearly 6% from the prior-year quarter.
EQIX’s results reflected steady growth in colocation and inter-connection revenues as enterprises and service providers look to integrate artificial intelligence into their strategies and offerings. During the quarter, Equinix’s total interconnections reached 460,500, rising 1% sequentially and 4% year over year. The company also raised its AFFO per share guidance for 2023.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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