Earnings Scorecard: Host Hotels - Analyst Blog
October 19 2011 - 11:30AM
Zacks
Host Hotels & Resorts Inc. (HST) reported
third quarter 2011 FFO (funds from operations) of $112 million or
16 cents per share compared with $75 million or 11 cents per share
in the year-earlier quarter.The third quarter 2011 FFO missed the
Zacks Consensus Estimate by a penny.
Fund from operations, a widely used metric to gauge the
performance of REITs, is obtained after adding depreciation and
amortization and other non-cash expenses to net income.
We cover below the results of the recent earnings announcement,
as well as the subsequent analysts’ estimate revisions and the
Zacks ratings for the short and long-term outlook on the stock.
Third Quarter Review
Total revenue increased to $1,142 million during the reported
quarter from $1,003 million in the year-ago quarter. Reported
revenues exceeded the Zacks Consensus Estimate by $10 million.
Comparable hotel revenue per available room (RevPAR) jumped 6.4%
during the reported quarter, due to higher occupancy (up 1.9%) and
average daily rates.
Comparable hotel adjusted operating margins in the reported
quarter expanded 110 basis points (bps). During the quarter,
adjusted EBITDA (Earnings before Interest Expense, Income Taxes,
Depreciation and Amortization) increased 27.7% to $212 million.
Read our full coverage on this earnings report:Host Hotels
Reports Mixed Results
Earnings Estimate Revisions - Overview
The company’s earnings estimates for fiscal 2011 have moved in
both directions since the earnings release,implying that the
analysts are cautious about the current fiscal performance of the
company. Let’s dig into the earnings estimate in details.
Agreement of Estimate Revisions
In the last 7 days, 2 out of 18 analysts covering the stock
increased their earnings estimates for the upcoming quarter and 1
out of 17 analysts increased the same for fiscal 2011. In the last
7 days, 11 out of 18 analysts covering the stock trimmed their
earnings estimates for the upcoming quarter and 15 out of 17
analysts decreased the same for fiscal 2011.This indicates a
negative directional movement for fiscal earnings.
Magnitude of Estimate Revisions
Earnings estimates for the upcoming quarter have decreased from
33 cents to 31 cents in the last 7 days and from 91 cents to 88
cents for fiscal 2011, which indicates that despite the gradual
improvement in fundamentals it remain challenged by the
broader economic trends.
Moving Forward
Host Hotels is the largest lodging REIT with high quality
lodging assets in geographically diverse locations. 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, which have the potential for significant
capital appreciation. This provides significant upside potential
for the company.
Host Hotels maximizes the value of its existing portfolio
through aggressive asset management, and works diligently with the
managers of its hotels to reduce operating costs and increase
revenues, and conducts selective capital improvements and
expansions designed to improve operations.
However, the acquisition spree of Host Hotels involves
significant upfront operating expenses with limited near-term
profitability. New hotels usually take time to generate revenues,
and will continue to drag margins till they get established.
Host Hotels currently retains a Zacks #3 Rank, which translates
into a short-term Hold rating. We are also maintaining our
long-term Neutral recommendation on the stock. One of its
competitors, LaSalle Hotel Properties (LHO) also
holds a Zacks #3 Rank.
HOST HOTEL&RSRT (HST): Free Stock Analysis Report
LASALLE HTL PRP (LHO): Free Stock Analysis Report
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