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Why Is Host Hotels (HST) Up 7.2% Since Last Earnings Report?

A month has gone by since the last earnings report for Host Hotels (HST). Shares have added about 7.2% 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 the most recent earnings report in order to get a better handle on the important drivers.

Host Hotels' Q3 FFO Tops, Occupancy Up, '23 View Raised

Host Hotels reported a third-quarter 2023 AFFO per share of 41 cents, which outpaced the Zacks Consensus Estimate of 35 cents. Moreover, the figure increased 7.9% from the prior-year quarter.

Results reflected 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 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 the $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.

Host Hotels’ 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 company revised its comparable hotel RevPAR projection for the current year to $210-$213 from $210-$214 estimated earlier.

Host Hotels 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.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision.

VGM Scores

Currently, Host Hotels has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

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

Performance of an Industry Player

Host Hotels belongs to the Zacks REIT and Equity Trust - Other industry. Another stock from the same industry, Vornado (VNO), has gained 7% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.

Vornado reported revenues of $451 million in the last reported quarter, representing a year-over-year change of -1.4%. EPS of $0.28 for the same period compares with $0.81 a year ago.

For the current quarter, Vornado is expected to post earnings of $0.61 per share, indicating a change of -15.3% from the year-ago quarter. The Zacks Consensus Estimate has changed -3% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Vornado. Also, the stock has a VGM Score of F.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Host Hotels & Resorts, Inc. (HST) : Free Stock Analysis Report

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