Why Is Host Hotels (HST) Up 8.2% Since Last Earnings Report?

A month has gone by since the last earnings report for Host Hotels (HST). Shares have added about 8.2% 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 its most recent earnings report in order to get a better handle on the important drivers.

Host Hotels Q2 FFO Beats Estimates, RevPAR Rises Y/Y

Host Hotels came out with better-than-expected second-quarter results, in terms of adjusted FFO per share and revenues. The hotel REIT reported second-quarter 2021 adjusted FFO per share of 12 cents, handily surpassing the Zacks Consensus Estimate of 4 cents. It generated total revenues of $649 million, which surpassed the Zacks Consensus Estimate of $606.4 million.

Adjusted FFO per share also compares favorably with a loss of 26 cents per share reported in the prior-year quarter. The top line improved significantly year over year.

The company’s RevPAR witnessed a significant year-over-year rise in the reported quarter.

It acquired the fee-simple interest in the 444-room Four Seasons Resort Orlando at Walt Disney World Resort for $610 million, and the Royal Ka’anapali and Ka’anapali Kai Golf Courses for $28 million.

Behind the Headlines

In the reported quarter, all owned-hotel pro-forma RevPAR (on a constant-dollar basis) increased significantly year over year to $99.86. All owned-hotel pro-forma EBITDA was $126 million.

As of the second-quarter end, room revenues from the transient business were $357 million, indicating a plunge of 33% as compared with revenues in the same period during the pre pandemic period 2019. Room revenues from group and contract businesses declined 81.9% and 58.5% from second-quarter 2019 to $59 million and $14 million, respectively.

Moreover, room nights for its transient, group and contract businesses declined 30%, 74.5% and 34.3%, respectively, from the same period in 2019. The company’s transient, group and contract businesses accounted for roughly 61%, 35% and 4% of its 2019 room sales, respectively.

Balance Sheet Position

Host Hotels exited the second quarter with liquidity of $1.6 billion, including FF&E escrow reserves of $139 million. As of the same date, the company’s debt balance amounted to $5.5 billion. It has no maturities until 2023.

Capital Expenditure

In the first half of 2021, the company incurred around $180 million of capital expenditure. Of this, $117 million was return on investment capital projects spend, and $63 million was renewal and replacement project expenditure.

Remarkably, for 2021, it expects a capital expenditure of $400-$475 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 49.84% due to these changes.

VGM Scores

Currently, Host Hotels has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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 upward for the stock, and the magnitude of these revisions looks promising. Notably, Host Hotels has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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