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Host Hotels (HST) to Post Q3 Earnings: What's in the Cards?

Host Hotels & Resorts, Inc. HST is scheduled to report third-quarter 2017 results on Nov 1, after the market closes.

Last quarter, this Bethesda, MD-based lodging real estate investment trust (REIT) delivered a better-than-expected performance in terms of funds from operations (FFO) per share, generating a positive surprise of 6.5%. Results indicate growth in comparable hotel Revenue per available room (RevPAR) and improvement in margin.

Moreover, Host Hotels has a decent surprise history. The company posted positive surprises in each of the trailing four quarters, with an average beat of 7.5%. This is depicted in the graph below:

Note: The EPS numbers presented in the above chart represent funds from operations (“FFO”) per share.

Currently, the Zacks Consensus Estimate for third-quarter FFO per share is pegged at 33 cents.

Let’s see how things are shaping up for this announcement.

Factors to Consider

Host Hotels boasts a portfolio of upscale hotels across lucrative markets in the United States. Also, the company is making concerted efforts to enhance its portfolio quality through strategic capital-recycling program. The company is making opportunistic acquisitions, as well as making strategic redevelopments to fortify its position in global vibrant markets. In addition, Host Hotels has a decent balance sheet and ample liquidity.

However, the company anticipates third-quarter results to be weaker than the first half. This is because of the impact of holiday shift — the Jewish holidays moving back from October to September, and tough comps related to the Olympics in Brazil in the third quarter last year. As such, the company expects 21% of its total EBITDA for 2017 to be generated in the quarter under review. Further, supply growth in the company’s key markets remains a concern.

Amid these, the Zacks Consensus Estimate for third-quarter revenues is pegged at $1.27 billion, marking an estimated decline of 1.7% year over year. The Zacks Consensus Estimate for Room Revenues is $883 million, denoting a decrease from $940 million reported in the prior quarter, while the Food and Beverage revenues estimate is pegged at $332 million which is also below $416 million reported in the previous quarter.
Also, in a month’s time, the Zacks Consensus Estimate of FFO per share for the third quarter moved down 2.9% to 33 cents, underlining analysts’ bearish sentiments.

Nevertheless, Host Hotels’ shares have rallied 7.3% over the past six months, outperforming the industry’s gain of 0.6%.

Earnings Whispers

Our proven model does not conclusively show that Host Hotels will likely beat estimates this season. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. However, that is not the case here as you will see below.

Zacks ESP: The Earnings ESP, which represents the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate, is pegged at -1.09%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Host Hotels currently has a Zacks Rank #4 (Sell).

This combination leaves our prediction inconclusive.

We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Here are a few stocks in the REIT sector that you may want to consider, as our model shows that these have the right combination of elements to report a positive surprise this quarter:

Regency Centers Corporation REG, slated to release third-quarter results on Nov 1, has an Earnings ESP of +2.96% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Sabra Health Care REIT, Inc. SBRA, scheduled to release earnings on Nov 1, has an Earnings ESP of +1.56% and a Zacks Rank of 3.

Boston Properties, Inc. BXP, set to release quarterly numbers on Nov 1, has an Earnings ESP of +0.55% and a Zacks Rank of 3.

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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Sabra Healthcare REIT, Inc. (SBRA): Free Stock Analysis Report
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Host Hotels & Resorts, Inc. (HST): Free Stock Analysis Report
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