Here's Why You Should Hold On To Host Hotels (HST) Stock Now

Host Hotels & Resorts, Inc. (NYSE:HST) is likely to gain from its solid portfolio of upscale hotels across potential markets. Furthermore, the company is anticipated to improve the revenue per available room (RevPAR) backed by its value enhancement initiatives. Moreover, demand is likely to benefit amid improving corporate profits, business investment, consumer sentiment and low unemployment level.

Last month, the company reported fourth-quarter 2017 adjusted funds from operations (FFO) of 42 cents per share, which outpaced the Zacks Consensus Estimate of 39 cents. Results reflect margin improvement through better productivity.

Importantly, Host Hotels undertakes a strategic capital-recycling program to enhance its portfolio quality and strengthen its position over global vibrant markets. Furthermore, the company has been monetizing a considerable part of real estate in Washington D.C. and lowering its exposure in New York.

In fact, following the end of the prior year, the company has completed the sale of the Key Bridge Marriott for $190 million. Further, it is under contract to sell the W New York for $190 million. This 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 RevPAR growth, have gone through substantial renovations.

Additionally, 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. Also, the company projects capital expenditures of $475-$550 million for 2018. This comprises $185-$220 million in ROI projects, and $290-$330 million in renewal and replacement projects. Such investments are anticipated to help the company improve its portfolio quality and bolster revenues as well.

In addition, Host Hotels has a decent balance sheet and ample liquidity. 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. This provides the company ample scope for deploying capital for long-term growth opportunities and at the same time, carrying out redevelopment initiatives.

Though supply growth has been lackluster in the past, it has gathered momentum in recent times. In fact, this growth is expected to remain elevated in 2018, particularly in markets where the company has exposure. Furthermore, the company’s performance might be weak in first-quarter 2018 due to tough comparisons resulting from inauguration and Women's March in D.C. last year, as well as Easter weekend beginning on Mar 30 this year.

In addition to this, the dilutive impact of asset sales cannot be bypassed. Also, rate hike remains another concern.

Shares of Host Hotels have outperformed the industry it belongs to, in the past six months. This Zacks Rank #3 (Hold) company’s shares have ascended 4.1%, while the industry incurred a loss of 8.5% during this time frame. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.



Additionally, the stock has seen the Zacks Consensus Estimate for 2018 FFO per share being revised 1.2% upward in a month’s time. Given the progress on fundamentals, the stock is likely to perform well in the upcoming period.

Stocks to Consider

A few better-ranked stocks from the real estate space include Arbor Realty Trust, Inc. (NYSE:ABR) , Sotherly Hotels Inc. (NASDAQ:SOHO) and Extra Space Storage Inc. (NYSE:EXR) . All three stocks carry a Zacks Rank of 2 (Buy).

Arbor Realty Trust’s Zacks Consensus Estimates for 2018 funds from operations (FFO) per share have been revised 2.3% upward to 90 cents over the past month. Its share price has risen 10.3% in six months’ time.

Sotherly Hotels’ FFO per share estimates for 2018 have been revised upward approximately 1.9% to $1.05 over the past month. The stock has gained 5.1% during the past six months.

Extra Space Storage’s FFO per share estimates for 2018 have been revised upward 1.8% to $4.56 over the past month. The stock has increased 8.6% during the same time frame.

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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Arbor Realty Trust (ABR): Free Stock Analysis Report

Host Hotels & Resorts, Inc. (HST): Free Stock Analysis Report

Sotherly Hotels Inc. (SOHO): Free Stock Analysis Report

Extra Space Storage Inc (EXR): Free Stock Analysis Report

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