A month has gone by since the last earnings report for Host Hotels (HST). Shares have added about 4.4% 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 reported a third-quarter adjusted funds from operations (AFFO) per share of 36 cents, in line with the Zacks Consensus Estimate. However, the figure decreased by 12.2% from the prior-year quarter.
Results reflected a year-over-year rise in revenues triggered by higher room, food and beverages and other revenues. However, the lodging real estate investment trust lowered its 2024 guidance.
Host Hotels generated total revenues of $1.32 billion, surpassing the Zacks Consensus Estimate by 2.2%. The top line rose 8.6% on a year-over-year basis.
Per James F. Risoleo, president and CEO of the company, “Host delivered comparable hotel Total RevPAR growth of 3.1% over the third quarter of 2023, driven by improvements in food and beverage revenues from group business. Comparable hotel RevPAR increased 0.8% for the quarter as a result of continued strong group demand and improving trends in Maui.”
Behind the Headlines
In the reported quarter, Host Hotels’ comparable hotel RevPAR was $206.21, rising marginally from the year-ago quarter’s $204.56. Though group demand remained strong, the growth was hindered by a slower-than-anticipated recovery in Maui and moderate domestic leisure demand.
Comparable hotel EBITDA came in at $329 million, decreasing by 1.8% year over year, with a comparable hotel EBITDA margin decline of 130 basis points to 25.3%.
The average room rate of $287.57 in the third quarter increased from $284.61 reported in the year-ago quarter.
The comparable average occupancy percentage in the quarter was 71.7%, down from 71.9% reported in the prior-year quarter.
The room nights for its transient, group and contract businesses witnessed a marginal decline from the prior-year period.
In July 2024, Host Hotels completed the acquisition of the fee simple interest in the 234-room, 1 Hotel Central Park for $265 million. During the same period, it also acquired the 450-room, The Ritz-Carlton O’ahu, Turtle Bay, for $680 million, net of key money received from Marriott International.
Balance Sheet Position
Host Hotels exited the third quarter with cash and cash equivalents of $564 million, down from $805 million as of June 30, 2024.
Host Hotels’ liquidity totaled $2.3 billion, including FF&E escrow reserves of $240 million and $1.5 billion available under the revolver portion of the credit facility as of Sept. 30, 2024.
Capital Expenditure
As of Sept. 30, 2024, Host Hotels’ capital expenditure aggregated $375 million. Of this, $164 million was the total return on investment project spend, $181 million was a renewal and replacement expenditure, and $30 million was a renewal and replacement for property damage reconstruction.
2024 Outlook
Host Hotels lowered its full-year AFFO per share guidance at the midpoint by 2 cents to $1.92 from $1.94 guided earlier.
The company kept its comparable hotel RevPAR projection for the current year at $215.
The adjusted EBITDAre is now expected at $1.63 billion, down from $1.65 billion projected earlier.
For 2024, management revised its total capital expenditure guidance in the range of $485-$580 million compared with the prior guidance of $500-$600 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
VGM Scores
Currently, Host Hotels has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. 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, Digital Realty Trust (DLR), has gained 7.1% over the past month. More than a month has passed since the company reported results for the quarter ended September 2024.
Digital Realty Trust reported revenues of $1.43 billion in the last reported quarter, representing a year-over-year change of +2.1%. EPS of $0.09 for the same period compares with $1.62 a year ago.
For the current quarter, Digital Realty Trust is expected to post earnings of $1.70 per share, indicating a change of +4.3% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.4% over the last 30 days.
Digital Realty Trust has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, 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
