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Why Is Host Hotels (HST) Up 38.2% Since Last Earnings Report?

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Zacks Equity Research
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A month has gone by since the last earnings report for Host Hotels (HST). Shares have added about 38.2% in that time frame, outperforming 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 Revenues Lag Estimates, RevPAR Down

Host Hotels reported third-quarter 2020 adjusted FFO per share of negative 11 cents. The Zacks Consensus Estimate for the same was negative 21 cents. Notably, the company reported adjusted FFO per share of 35 cents in the prior-year quarter.

It generated total revenues of $198 million, which missed the Zacks Consensus Estimate of 230.6 million. The top line also declined 84.3% year over year.

Results were affected by year-over-year decline in travel amid the coronavirus pandemic. In fact, RevPAR witnessed significant decline. Nonetheless, the company reopened 20 hotels during the quarter, driving sequential growth in RevPAR and monthly occupancy.

Behind the Headlines

During the third quarter, all owned hotel RevPAR (on a constant-dollar basis) fell 84.1% year over year to $29.36. Third-quarter all owned hotel pro forma EBITDA was negative $91 million. The company reported EBITDA of $310 million in the prior-year quarter.

Despite the pandemic, demand during the September-end quarter was primarily driven by drive-to and resort destinations. As of the third-quarter end, room revenues from the transient business were $98 million, indicating a year-over-year plunge of 80.9%. Room revenues from group and contract businesses declined 93% and 69.3% year over year, to $17 million and $11 million, respectively.

Moreover, room nights for its transient, group and contract business declined 75.1%, 88.8% and 57.7%, respectively, from the prior-year quarter. Notably, the company’s transient, group and contract businesses accounted for roughly 61%, 35% and 4%, respectively, of its 2019 room sales.

Balance Sheet Position

Host Hotels exited the third quarter with a cash balance of $2.43 billion and FF&E escrow reserves of $1.38 million. It fully drew revolver and term loan parts of its credit facility. As of the same date, its debt balance amounted to $5.6 billion. The company has no maturities until 2023.

Capital Expenditure

During the January-September period, the company invested around $384 million in capital expenditure. Of this, $262 million was ROI capital projects spend, and $122 million was renewal and replacement project expenditure.

Remarkably, for 2020, the company now guided capital expenditure spending of $475-$510 million, compared with $475-$520 million mentioned earlier.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision flatlined during the past month.

VGM Scores

Currently, Host Hotels has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

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

Outlook

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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