On Jun 21, 2013, we reiterated our long-term recommendation on
lodging real estate investment trust (REIT) -
Host Hotels & Resorts Inc.
) - at Neutral. The decision is based on the strong performance
of the company's core properties in first-quarter 2013 and its
concerted efforts toward increasing shareholders' wealth through
However, Host Hotels' concentration of properties in the
upscale segments exposes it to risks of lower demand during
Host Hotels reported another robust quarterly result, with
first-quarter 2013 adjusted FFO per share of 28 cents, beating
both the Zacks Consensus Estimate and the year-ago figure by 4
cents. Quarterly results benefited from a 5.1% rise in comparable
hotel RevPAR and solid performances at its luxury and resort, and
conference center properties. Consequently, the company has
raised its outlook for 2013.
Moreover, Host Hotels has a strong balance sheet that provides
it financial flexibility to aim for high-yielding acquisitions
and high ROI capital projects. In addition, recently the company
hiked its dividend payout by 10%, reflecting the 10
consecutive quarter of dividend increases since March 2011.
Notably, a steady dividend payout facilitates the long-term
strategy of Host Hotels to provide attractive risk-adjusted
returns to its stockholders.
However, Host Hotels' properties are mainly concentrated in
the luxury and upper-upscale segments, which had been the weakest
performing segments during the economic downturn. This remains a
drag as unfavorable macroeconomic conditions compel customers to
reduce their discretionary spending and choose lower priced
brands over the company's premium ones.
Following the release of first-quarter 2013 results, over the
last 30 days, the Zacks Consensus Estimate for 2013 remained
stable at $1.30 per share. On the other hand, for 2014, it moved
north by 2.8% to $1.46 per share. Thus, the stock now carries a
Zacks Rank #2 (Buy).
Other Stocks to Consider
Better performing lodging REITs that are worth a look include
Sunstone Hotel Investors Inc.
) - with a Zacks Rank #1 (Strong Buy) as well as
LaSalle Hotel Properties
Chesapeake Lodging Trust
) - with a Zacks Rank #2 (Buy).
Note: FFO, a widely accepted and reported measure of the
performance of REITs is derived by adding depreciation,
amortization and other non-cash expenses to net income.
CHESAPEAKE LODG (CHSP): Free Stock Analysis
HOST HOTEL&RSRT (HST): Free Stock Analysis
LASALLE HTL PRP (LHO): Free Stock Analysis
SUNSTONE HOTEL (SHO): Free Stock Analysis
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