Earnings Preview: Host Hotels - Analyst Blog

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Host Hotels & Resorts Inc ( HST ) , a real estate investment trust (REIT), is scheduled to report its first quarter 2012 earnings on April 25, 2012. The current Zacks Consensus Estimate for the first quarter is pegged at 13 cents per share, representing a year-over-year growth of about 17.7%.

Fourth Quarter Recap

Host Hotels 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 penny. 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.

The company reported fourth quarter adjusted FFO of $242 million or 32 cents per share, compared with $201 million or 28 cents per share in the year-earlier quarter.

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

For fiscal 2011, the company reported FFO of $658 million or 89 cents per share versus $465 million or 68 cents in 2010. The fiscal 2011 FFO was also ahead of the Zacks Consensus Estimate by one cent

For fiscal 2011, the company reported adjusted FFO of $681 million or 92 cents per share, compared with $504 million or 74 cents per share in 2010.

For fiscal 2011, the company reported revenue of $4,998 million compared with $4,428 million in 2010. The fiscal 2011 revenue beat the Zacks Consensus Estimate by $73 million.

Agreement of Analysts

In the last 7 days, none of the analysts revised their earnings estimate for the first quarter while one out 18 analysts raised the estimate for fiscal 2012 and one decreased the same. This signifies that the analysts are cautious about both the short- and long-term earnings prospect of the company.

Magnitude of Estimate Revisions

Taking into account the analysts' earnings revision, the Zacks Consensus Estimate for the first quarter and fiscal 2012 remained constant over the last 7 days and 30 days at 13 cents and $1.02, respectively.

Our Recommendation

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 lodging assets in hard-to-replicate areas, which have the potential for significant capital appreciation. This provides a significant upside potential for the company.

The company 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. In addition, bulk of its properties is operated under some of the most recognized brand names in the hospitality industry. This improves the profitability of the company and strengthens its leading position in the market.

However, the continuous 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 down margins till they get established.

Host Hotels currently retains a Zacks #3 Rank, which translates into a short-term Sell rating. We are also maintaining our long-term Neutral recommendation on the stock. One of its competitors, La Salle Hotel properties ( LHO ) holds a Zacks #2 Rank, which implies a short-term Buy rating.


 
HOST HOTEL&RSRT ( HST ): Free Stock Analysis Report
 
LASALLE HTL PRP ( LHO ): Free Stock Analysis Report
 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: HST , LHO

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