Earnings Preview: Host Hotels - Analyst Blog
July 15 2011 - 5:15AM
Zacks
Host Hotels & Resorts
Inc. (HST), the largest lodging real estate investment
trust (REIT), is scheduled to report its fiscal 2011 second quarter
earnings on July 20. The current Zacks Consensus Estimate for the
second quarter is 29 cents per share, representing a year-over-year
increase of 26.6%.
First Quarter Recap
Host Hotels reported first quarter 2011 recurring FFO (fund from
operations) of 12 cents per share, which was in line with the Zacks
Consensus Estimate. 'Fund From Operations' is a widely used metric
to gauge the performance of REITs and is obtained after adding
depreciation and amortization and other non-cash expenses to net
income.
Total revenues increased to $903
million during the reported quarter from $823 million in the
year-ago quarter. The reported revenues were below the Zacks
Consensus Estimate of $933 million. Comparable hotel revenue per
available room (RevPAR) increased 5.4% during the first quarter
2011, driven by a rise in occupancy and average daily rates. The
increase in RevPAR was primarily due to a rise in the average room
rate along with a 4.8% improvement in occupancy.
Comparable hotel adjusted operating
margins for the first quarter decreased 10 bps due to high taxes,
property-level bonuses and cancellation revenue. Operating margins
were further reduced by 60 basis points due to business disruption
at the Sheraton New York Hotel & Towers and the Philadelphia
Marriott Downtown hotel. During the quarter, adjusted EBITDA
(Earnings before Interest Expense, Income Taxes, Depreciation and
Amortization) increased 14% to $144 million.
Agreement of Analysts
In the last 7 days, earnings estimate for the second quarter was
raised by 1out of the 18 analysts covering the stock, while none
revised it downwards. For fiscal 2011, only 1 out of 19 analysts
covering the stock has raised the earnings estimate in the last 7
days, while none decreased the same. This demonstrates that the
analysts are mostly neutral about the future outlook of the company
in general, although it is slightly skewed in the positive
direction.
Magnitude of Estimate
Revisions
Earnings estimates have remained stagnant for the last 7 days for
the second quarter and full fiscal 2011 at 29 cents and 93 cents
per share, respectively, meaning that analysts were overtly
cautious about the performance of the company.
Neutral on Host
Hotels
We currently have a Neutral recommendation on Host Hotels, which
presently has a Zacks #3 Rank, translating into a short-term Hold
rating. We also have a Neutral recommendation and a Zacks #3 Rank
for La Salle Hotel Properties (LHO), one of the
competitors of Host Hotels.
Host Hotels is one of the largest
owners of luxury and upper-upscale hotels, primarily operated under
premium brands, such as Marriott, Westin, Sheraton, Ritz-Carlton,
Hyatt, Four Seasons, and St. Regi. Over the years, the company has
executed a focused and disciplined long-term strategic plan to
acquire high quality lodging assets in hard-to-replicate areas in
geographically diverse locations, which have the potential for
significant capital appreciation.
However, the majority of Host Hotels’ properties are concentrated
in the luxury and upper-upscale segments, which had been the
weakest performing segments during the economic downturn. While the
outlook for these markets has improved, the pace of the improvement
remains quite uneven and unsteady. Consequently, we remain
skeptical about the long-term earnings potential of the
company.
HOST HOTEL&RSRT (HST): Free Stock Analysis Report
LASALLE HTL PRP (LHO): Free Stock Analysis Report
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