Host Hotels' (HST) Q4 FFO Beats Estimates, Revenues Grow Y/Y

Host Hotels & Resorts, Inc.HST reported fourth-quarter 2017 adjusted funds from operations (FFO) of 42 cents per share, which outpaced the Zacks Consensus Estimate of 39 cents. The adjusted FFO per share also climbed 2.4% from the year-ago quarter tally of 41 cents.

Results reflect margin improvement through better productivity. The company also announced that it has signed an agreement to acquire three Hyatt-managed hotels.

The company posted total revenues of $1.34 billion which grew 0.5% year over year but narrowly missed the Zacks Consensus Estimate of $1.35 billion.

For full-year 2017, the company delivered adjusted FFO per share of $1.69, unchanged from the previous year. However, revenues edged down 0.8% year over year to around $5.4 billion, as a result of revenue loss from the sale of 14 hotels in 2016 and 2017. Also, Hurricanes Harvey and Irma adversely affected total revenues in the year.

Acquisitions and Dispositions

Host Hotels is on track with its strategic capital-recycling efforts. Following the year end, Host Hotels completed the sale of the Key Bridge Marriott for $190 million. Further, the company is under contract to sell the W New York for $190 million. The sale is likely to close in second-quarter 2018.

On the other hand, three Hyatt assets are placed under contract for acquisition. These include the 301-room Andaz Maui, 668-room Grand Hyatt San Francisco, and 454-room Hyatt Regency Coconut Point. The assets, positioned in markets with solid revenue per available room (RevPAR) growth, have gone through substantial renovations. Expected to close by the end of the current quarter, the company will fund this transaction through a mixture of cash and drawing on the revolver part of its credit facility.

Quarter in Details

During the reported quarter, comparable hotel revenues increased 2.3% year over year to $1.2 billion. Comparable hotel RevPAR (on a constant dollar basis) was up 2.2% year over year, driven by a 0.3% increase in average room rate and 140 basis points (bps) expansion in occupancy to 76.6%. At its domestic properties, comparable hotel RevPAR increased 2.1%, and climbed 7.3% at its international properties, on a constant-dollar basis.

For the fourth quarter, comparable hotel EBITDA margin advanced 10 bps.

Finally, the company exited 2017 with around $ 913 million of unrestricted cash and $822 million of available capacity remaining under the revolver part of its credit facility. In addition, as of Dec 31, 2017, total debt was $4.0 billion, having an average maturity of 5.1 years and an average interest rate of 4.0%. Notably, it did not buy back any shares in 2017. It has $500 million of capacity available under its current repurchase program.

Capital Investments

During 2017, the company expended around $277 million on capital expenditures - $72 million was return on investment (ROI) capital projects, and $205 million for renewal and replacement projects.


Host Hotels expects 2018 adjusted FFO per share in the range of $1.60-$1.70. The Zacks Consensus Estimate for the same is currently pegged at $1.65 and lies within this range.

The company's full-year projection includes comparable hotel RevPAR (constant U.S. dollar basis) growth of 0.5-2.5%. Moreover, the company expects capital expenditures of $475-$550 million for the year. This comprises $185-$220 million in ROI projects, and $290-$330 million in renewal and replacement projects.

Dividend Update

On Feb 21, the company's board approved a regular quarterly cash dividend of 20 cents per share on its common stock. The dividend will be paid on Apr 16 to stockholders of record as of Mar 29, 2018.

In Conclusion

Host Hotels' solid portfolio of upscale hotels across lucrative markets, strategic capital-recycling program and a healthy balance sheet bode well for long-term growth. The company is has been monetizing a considerable part of real estate in Washington D.C. and lowering its exposure in New York. Nevertheless, supply growth, specifically in the company's key markets, remains a concern. In addition to this, dilutive impact of asset sales cannot be bypassed. Also, rate hike remains another key concern.

Host Hotels currently has a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

The stock has dropped 2.8% in the past three months, outperforming the 13.0% loss incurred by the industry it belongs to.

Host Hotels & Resorts, Inc. Price, Consensus and EPS Surprise

Host Hotels & Resorts, Inc. Price, Consensus and EPS Surprise | Host Hotels & Resorts, Inc. Quote

We now look forward to the earnings releases of EPR Properties EPR , Lamar Advertising Company LAMR and Outfront Media Inc. OUT , all of which are expected to report their numbers next week.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) - a widely used metric to gauge the performance of REITs.

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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 Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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