Host Hotels & Resorts, Inc.
) - the lodging real estate investment trust (REIT) - disclosed
second-quarter 2014 adjusted funds from operations (FFO) per share
of 43 cents, in line with the Zacks Consensus Estimate. However,
this came below the year-ago figure by 2 cents.
Despite a rise in comparable hotel RevPAR, the tough comparison
on a year-over-year basis is due to gains experienced in the
year-ago quarter from land sales, the timing of deals and cost
associated with the timeshare unit development in Maui.
Nevertheless, Host Hotels increased its 2014 adjusted FFO per share
Total revenue came in at $1,431 million, which upped 2.3% on a
year-over-year basis. This came in line with the Zacks Consensus
Quarter in Details
Comparable hotel RevPAR climbed 5.1% year over year to $172.08,
primarily driven by continued improvement in average room rates.
Average room rates increased 4.1% year over year to $212.37 and
occupancy rose 70 basis points (bps) to 81.0% on a year-over-year
basis, in comparable hotels. As a result, comparable
hotel adjusted operating profit margin upped 60 bps year over year
to 29.6%. However, adjusted earnings before interest, tax,
depreciation and amortization (EBITDA) dipped 4.6% to $411 million
on a year-over-year basis.
During the quarter, Host Hotels spent $18 million in
redevelopment and return on investment (ROI) expenditures. The
company also expended nearly $71 million in renewal and replacement
expenses. Additionally, Host Hotels used up approximately $4
million for capital and operational improvement of the acquired
As of Jun 30, 2014, Host Hotels had cash and cash equivalents of
$440 million, up from $392 million at the end of first-quarter
2014. The company has a total debt of $4.0 billion, lower than $4.1
billion at the end of last quarter. Host Hotels has around
$778 million of available capacity under its credit facility
at the end of second-quarter 2014.
2014 Outlook Increased
Host Hotels raised its 2014 adjusted FFO per share guidance and
now projects it to be in the range of $1.44 - $1.47 (prior range
being $1.41 - $1.46). The Zacks Consensus Estimate of $1.45 for the
same falls within this new range.
Although tough year-over-year comparisons affected the
second-quarter 2014 FFO of Host Hotels, the strategic portfolio
enhancement activities bode well for the company's long-term
growth. Moreover, guidance increase boosts investors' confidence in
the stock. Going forward, we believe that the company's solid
portfolio of upscale hotels across vibrant markets in the world has
the potential for significant capital appreciation.
Host Hotels currently carries a Zacks Rank #2 (Buy). Some
better-ranked stocks in the same sector include Ashford Hospitality
Trust, Inc. (
), FelCor Lodging Trust Incorporated (
) and Pebblebrook Hotel Trust (
). All three stocks carry a Zacks Rank #2 (Buy).
Note: FFO, 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.
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