HST Host Hotels and Resorts Inc

Host Hotels & Resorts Inc. (HST) reported fourth quarter 2011 FFO (funds from operations) of $233 million or 31 cents per share, compared with $187 million or 26 cents per share in the year-earlier quarter. The fourth quarter 2011 FFO beat the Zacks Consensus Estimate by a cent.

Funds 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.

Fourth Quarter Review

Total revenue increased to $1,658 million during the fourth quarter from $1,491 million in the year-ago quarter.  Reported revenue also exceeded the Zacks Consensus Estimate by $31 million.

For fiscal 2011, the company reported total revenue of $4998 million compared with $4428 million in 2010. Full year revenue also beat the Zacks Consensus Estimate by $73 million.

Comparable hotel revenue per available room (RevPAR) jumped 5.9% during the reported quarter, driven by a rise in occupancy and average daily rates. The increase in RevPAR was primarily attributable to average room rates increase of 3.8% and a 1.3% rise in occupancy.

Read our full coverage on this earnings report: Host Hotel Beats Estimates

Earnings Estimate Revisions – Overview

Fiscal earnings estimates have moved in both directions since the earnings release,  implying that the analysts are neutral  regarding the long-term performance of the company. Let’s dig into the earnings estimate details.

Agreement of Estimate Revisions

In the last 7 days, earnings estimates for fiscal 2012 were decreased by 14 analysts out of the 15 covering the stock while none increased the same. For fiscal 2013, one out of the 17 analysts covering the stock revised their estimates upward, while 6 lowered the same over the same time period. This indicates a negative bias on the analysts’ part for the fiscal year earnings.

Magnitude of Estimate Revisions              

Earnings estimates for fiscal 2012 have decreased by 6 cents to $1.02 per share over the last 7 days. For fiscal 2013, earnings estimates have decreased by 7 cents to $1.22 over the same period. This indicates that the analysts are pessimistic about the future performance of the company.

 Moving Forward

Based in Bethesda, Maryland, Host Hotels is the largest lodging real estate investment trust (REIT), and one of the largest owners of luxury and upper-upscale hotels, primarily operated under premium brand, such as Marriott, Westin, Sheraton, Ritz-Carlton, Hyatt, W, Four Seasons, and St. Regi.

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.

Host Hotels has a strong balance sheet, which provides the financial flexibility to aim high-yielding acquisitions, high ROI (return on investments) capital projects, dividend payouts, and share buybacks. This augurs well for its long-term growth.

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. If this trend continues in future, the bottom line of the company is likely to be affected, reducing its operating margins.

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, La Salle Hotel properties (LHO) also holds a Zacks #3 Rank.

About Earnings Estimate Scorecard

As a PhD from MIT, Len Zacks proved over 30 years ago that earnings estimate revisions are the most powerful force impacting stock prices. He turned this ground breaking discovery into two of the most celebrating stock rating systems in use today. The Zacks Rank for stock trading in a 1 to 3 month time horizon and the Zacks Recommendation for long-term investing (6+ months). These “Earnings Estimate Scorecard” articles help analyze the important aspects of estimate revisions for each stock after their quarterly earnings announcements. Learn more about earnings estimates and our proven stock ratings at  http://www.zacks.com/education/

 
HOST HOTEL&RSRT (HST): Free Stock Analysis Report
 
LASALLE HTL PRP (LHO): Free Stock Analysis Report
 
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