Host Hotel Reports Solid 1Q - Analyst Blog


Host Hotels & Resorts Inc ( HST ) reported first quarter 2012 FFO (funds from operations) of $101 million or 14 cents per share compared with $77 million or 11 cents per share in the year-earlier quarter and 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 first-quarter adjusted FFO of $102 million or 14 cents per share, versus $82 million or 12 cents per share in the year-earlier quarter.

Total revenue increased to $985 million during the reported quarter from $893 million in the year-ago quarter. The increase in revenue was driven by good performance of the company's owned hotels including the ten hotels acquired in 2011.

Comparable hotel revenue per available room (RevPAR) jumped 6.1% during the reported quarter, driven by a rise in occupancy and average daily rates. The increase in RevPAR was primarily attributable to a 2.9% rise in average room rates and a 2.1% rise in occupancy.

Comparable hotel adjusted operating margin in the reported quarter increased 100 basis points (bps) in the first quarter. During the quarter, adjusted EBITDA (Earnings before Interest Expense, Income Taxes, Depreciation and Amortization) increased 22.2% to $176 million.

During the first quarter of 2012, the company completed the renovation of 270 rooms at the W New York - Union Square. The company has invested approximately $14 million on acquisitions in the quarter. Additionally, the company completed the redevelopment of the Chicago Marriott O'Hare, Atlanta Marriott Perimeter Center and the 95,000 square feet of meeting space at the San Diego Marriott Marquis & Marina.

During the quarter , the company invested $48 million  on redevelopment and return on investment ( ROI ) projects, which are expected to enhance the company's profitability amid the challenging market conditions. Further, Host Hotels incurred renewal and replacement expenditures of approximately $100 million to ensure the standards of its portfolio.

During the reported quarter, the company sold the 685-room San Francisco airport Marriott for $108 million.

During the reported quarter, the company issued approximately 11.1 million shares at an average price of $15.67 per share for approximately $172 million.  The company issued $350 million of 5 1/4% Series A senior notes maturing in 2022, for net proceeds of $344 million during the quarter.

At the end of the first quarter, Host Hotels had over $1,312 million in cash and cash equivalents and about $859 million available under its credit facility. Total debt of the company at the end of first quarter 2012 was $6.1 billion.

Host Hotels anticipates the gradual revival of the overall economy to boost its operating results in 2012, with comparable hotel RevPAR expected to increase in the range of 5.0% to 7.0% for the full year. For fiscal 2012, Host Hotels expects to incur approximately $300 million to $330 million in renewal and replacement expenditures and $150 million-$170 million as ROI expenditure and $100 million-$110 million in acquisitions. The company currently expects adjusted FFO for full-year 2012 in the range of $1.01 per share to $1.08 per share.

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 ) holds a Zacks #1 Rank, which implies a short-term Strong 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 , ROI

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