Will Host Hotels (HST) Pull Off A Surprise In Q1 Earnings?

Host Hotels & Resorts, Inc. (NYSE:HST) is slated to report first-quarter 2017 results before the market opens on Apr 28.

Last quarter, this Bethesda, MD-based lodging real estate investment trust (“REIT”) delivered a better-than-expected performance, generating a positive surprise of 7.89%. Over the past four trailing quarters, the company posted surprises in three occasions, with an average beat of 4.64%.

Currently, the Zacks Consensus Estimate for first-quarter funds from operations (“FFO”) per share is pegged at 39 cents.

Host Hotels & Resorts, Inc. Price and EPS Surprise

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

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

Why a Likely Positive Surprise?

Our proven model shows that Host Hotels is likely to beat on estimates because it has the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) to beat estimates, and Host Hotels has the right mix.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks ESP: The Earnings ESP, which represents the percentage difference between the Most Accurate estimate of 40 cents and the Zacks Consensus Estimate of 39 cents, is +2.56%. This is a meaningful and leading indicator of a likely positive surprise.

Zacks Rank: Host Hotels’ Zacks Rank #3, when combined with a positive ESP, makes us reasonably confident of a positive surprise this season.

Conversely, 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.

What's Driving the Better-than-Expected Earnings?

Host Hotels boasts a portfolio of upscale hotels across lucrative markets in the U.S. Also, the company undertook a strategic capital-recycling program to enhance portfolio quality and fortify its position over global vibrant markets. Moreover, Host Hotels has a decent balance sheet and ample liquidity. The company expects approximately 23.5% of its total EBITDA to be generated in the first quarter.

Specifically, Host Hotels’ first-quarter results are likely to display growth in comparable hotel revenues and improvement in productivity at many of the company’s hotels. As such margin is anticipated to improve in the to-be-reported quarter backed by productivity improvements and lower utility costs. Notably, the lower utility costs resulted from the implementation of energy-saving ROI projects over the past several years.

Moreover, over the past six months, shares of Host Hotels outperformed the Zacks categorized REIT and Equity Trust – Other industry. The shares logged in a return of 23.4%, as against 4.8% growth recorded by the industry.



However, though supply growth has been tepid in the past, it gathered momentum in recent times. In fact, lodging fundamentals continue to weaken in 2017, with supply increasing, particularly in the major markets, where the company enjoys exposure.

Amid these, the Zacks Consensus Estimate for first-quarter FFO per share is currently pegged at 39 cents. The estimate remained unchanged over the last 60 days.

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 they have the right combination of elements to report a positive surprise this quarter:

Hudson Pacific Properties, Inc. (NYSE:HPP) , slated to release first-quarter results on May 4, has an Earnings ESP of +2.08% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Taubman Centers, Inc. (NYSE:TCO) , scheduled to release earnings on Apr 27, has an Earnings ESP of +1.12% and a Zacks Rank #3.

EPR Properties (NYSE:EPR) , slated to release earnings on May 2, has an Earnings ESP of +0.84% and a Zacks Rank #3.

Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. 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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