Host Hotels (HST) to Report Q4 Earnings: What's in Store?

Zacks Equity Research

Host Hotels & Resorts, Inc. HST is slated to report fourth-quarter and full-year 2019 results after market close on Feb 19. The company’s revenues and funds from operations (FFO) per share are expected to display year-over-year declines.

In the last reported quarter, this Bethesda, MD-based lodging real estate investment trust (REIT) reported a positive surprise of around 2.94% with respect to FFO per share. Results were supported by comparable hotel revenues growth.

Over the preceding four quarters, the company surpassed estimates on three occasions and missed in the other, the average positive beat being 3.16%. The graph below depicts this surprise history:

Host Hotels & Resorts, Inc. Price and EPS Surprise
 

Host Hotels & Resorts, Inc. Price and EPS Surprise

Host Hotels & Resorts, Inc. price-eps-surprise | Host Hotels & Resorts, Inc. Quote

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

Factors to Consider

Host Hotels has improved its portfolio quality by recycling capital out of low revenue per available room (RevPAR) assets to the high RevPAR ones. The company has refocused its local presence through an accretive capital-recycling strategy, while reducing exposure to troubled assets. Furthermore, the company is likely to have benefited from its value-enhancement initiatives. The quarterly performance is likely to have benefited from a better December holiday calendar compared with 2018 and low renovation disruption.

However, the company cannot bypass the near-term dilutive impact from asset dispositions. Moreover, amid elevated supply level, maintaining a high level of occupancy and average daily rates (ADR) is a challenge. This is likely to have limited overall RevPAR growth for its portfolio in the December-end quarter.

Further, amid prevailing global slowdown and uncertainty surrounding the trade deals, businesses have adopted a cautious stance. This has resulted in a decline in business-transient demand. The soft operating environment is expected to have adversely impacted hotel REITs' performance. Also, rising wage pressures add to its woes.

In fact, per a report from CBRE Group, in the fourth quarter, hotel demand increased 2% nationally, while supply grew 2.1%. National occupancy edged down 0.1% year over year to 61.8%, though ADR was up 0.7% in the quarter under review. While RevPAR also increased 0.7%, it denotes a slower pace than the 2.4% experienced in the prior year.

The Zacks Consensus Estimate for Host Hotels’ fourth-quarter revenues is presently pinned at $1.32 billion, suggesting a 2.7% decrease year over year. Moreover, there was no solid catalyst during the quarter. Hence, in a month’s time, the Zacks Consensus Estimate of FFO per share remained unrevised at 40 cents. The figure calls for a year-over-year decline of roughly 7%.

For full-year 2019, the company expects adjusted FFO per share of $1.75-$1.78. The company’s full-year projection includes comparable hotel RevPAR (constant U.S. dollar basis) growth of -1% to -0.25%.

The Zacks Consensus Estimate for full-year 2019 FFO per share is currently pinned at $1.77, suggesting no year-over-year change on revenues of $5.46 billion.

Here is what our quantitative model predicts:

Our proven model does not conclusively predict a positive surprise in terms of FFO per share for Host Hotels this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of a FFO beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Although Host Hotels carries a Zacks Rank of 3, its Earnings ESP of 0.00% makes surprise prediction difficult.

Stocks That Warrant a Look

Here are a few stocks in the REIT sector that you may want to consider, as our model shows that these have the right combination of elements to report a positive surprise this quarter:

Realty Income Corporation O, scheduled to release earnings on Feb 19, has an Earnings ESP of +1.25% and currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Ventas, Inc. VTR, slated to report fourth-quarter results on Feb 20, has an Earnings ESP of +0.81% and holds a Zacks Rank of 3, at present.

Urstadt Biddle Properties Inc. UBA, expected to release quarterly numbers around Mar 13, has an Earnings ESP of +1.41% and carries a Zacks Rank of 3, currently.

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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