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Host Hotels Stock Rises 12.8% in 3 Months: Will the Trend Last?
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Shares of Host Hotels & Resorts Inc. (HST - Free Report) have gained 12.8% in the past three months against the industry’s decline of 3.7%.
The Bethesda, MD-based lodging real estate investment trust (REIT) owns a portfolio of luxury and upper-upscale hotels in the top U.S markets and the Sunbelt region. The recovery in demand for the company’s well-located properties in markets with strong demand drivers has benefited the company lately.
Last month, this Zacks Rank #3 (Hold) company reported third-quarter adjusted funds from operations (AFFO) per share of 36 cents, in line with the Zacks Consensus Estimate. However, the figure decreased by 12.2% from the prior-year quarter.
Image Source: Zacks Investment Research
Let us decipher the possible factors behind the surge in the stock price.
Host Hotels has a strong Sunbelt exposure and presence in the top U.S. markets. Its properties are advantageously located in central business districts of major cities, thus driving demand. The improvement in group travel demand and business transient demand have aided occupancy and revenue per available room growth over the past few quarters. The company is also experiencing continued strength in group business.
HST’s Capital Allocations
Host Hotels undertakes strategic capital allocations to improve its portfolio quality and strengthen its position in the United States, where it has a greater scale and competitive advantage. From the beginning of 2024 through Sept. 30, 2024, the company incurred $375 million in capital expenditure. For 2024, management expects total capital expenditures within $485-$580 million.
HST’s Capital Recycling Program
Over the years, HST has made concerted efforts to dispose of non-strategic assets with lower growth potential or properties with significant capital expenditure requirements through its capital-recycling program. It has redeployed the proceeds to acquire or invest in premium properties in markets expected to recover faster.
Per the company’s November 2024 Investor Presentation, from 2021 through the end of the third quarter of 2024, total dispositions amounted to $1.5 billion, 17.5 times the EBITDA multiple. Its acquisitions during this period amounted to $3.3 billion, 13.3 times the EBITDA multiple. Such efforts highlight its prudent capital-management practices, preserve balance sheet strength and pave the way to capitalize on long-term growth opportunities.
HST’s Balance Sheet Position
Host Hotels has a healthy balance sheet and has been undertaking steps to fortify its balance sheet. As of Sept. 30, 2024, the company had $2.3 billion in total available liquidity. Moreover, it is the only company with an investment-grade rating among the lodging REITs, having ratings of Baa3/Positive from Moody’s, BBB-/Stable from S&P Global and BBB/Stable from Fitch. This renders access to the debt market at favorable costs. Therefore, Host Hotels has ample financial flexibility for deploying capital for long-term growth opportunities while carrying out redevelopment initiatives.
HST’s Dividend Payouts
Solid dividend payouts are a massive enticement for REIT investors, and Host Hotels has remained committed to that. HST has increased its dividend seven times in the last five years and has a 41% payout ratio. Such efforts boost investors’ confidence in the stock. Check out Host Hotels & Resorts’ dividend history here.
Risks Likely to Affect HST’s Positive Trend
Host Hotels’ growth has been hindered by the slow recovery from the wildfires in Maui, a moderation in domestic leisure transient demand due to increased travel to international locations and a gradual post-pandemic rebound in specific markets, such as San Francisco.
Moreover, challenges in the supply chain have led to project delays across the United States, and a restrictive lending environment has made it difficult to obtain construction financing for future projects.
The Zacks Consensus Estimate for Alpine Income’s 2024 FFO per share has moved 6.1% upward in the past month to $1.70.
The Zacks Consensus Estimate for Gladstone Commercial’s current-year FFO per share has moved 2.1% northward over the past month to $1.43.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.
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Host Hotels Stock Rises 12.8% in 3 Months: Will the Trend Last?
Shares of Host Hotels & Resorts Inc. (HST - Free Report) have gained 12.8% in the past three months against the industry’s decline of 3.7%.
The Bethesda, MD-based lodging real estate investment trust (REIT) owns a portfolio of luxury and upper-upscale hotels in the top U.S markets and the Sunbelt region. The recovery in demand for the company’s well-located properties in markets with strong demand drivers has benefited the company lately.
Last month, this Zacks Rank #3 (Hold) company reported third-quarter adjusted funds from operations (AFFO) per share of 36 cents, in line with the Zacks Consensus Estimate. However, the figure decreased by 12.2% from the prior-year quarter.
Image Source: Zacks Investment Research
Let us decipher the possible factors behind the surge in the stock price.
Host Hotels has a strong Sunbelt exposure and presence in the top U.S. markets. Its properties are advantageously located in central business districts of major cities, thus driving demand. The improvement in group travel demand and business transient demand have aided occupancy and revenue per available room growth over the past few quarters. The company is also experiencing continued strength in group business.
HST’s Capital Allocations
Host Hotels undertakes strategic capital allocations to improve its portfolio quality and strengthen its position in the United States, where it has a greater scale and competitive advantage. From the beginning of 2024 through Sept. 30, 2024, the company incurred $375 million in capital expenditure. For 2024, management expects total capital expenditures within $485-$580 million.
HST’s Capital Recycling Program
Over the years, HST has made concerted efforts to dispose of non-strategic assets with lower growth potential or properties with significant capital expenditure requirements through its capital-recycling program. It has redeployed the proceeds to acquire or invest in premium properties in markets expected to recover faster.
Per the company’s November 2024 Investor Presentation, from 2021 through the end of the third quarter of 2024, total dispositions amounted to $1.5 billion, 17.5 times the EBITDA multiple. Its acquisitions during this period amounted to $3.3 billion, 13.3 times the EBITDA multiple. Such efforts highlight its prudent capital-management practices, preserve balance sheet strength and pave the way to capitalize on long-term growth opportunities.
HST’s Balance Sheet Position
Host Hotels has a healthy balance sheet and has been undertaking steps to fortify its balance sheet. As of Sept. 30, 2024, the company had $2.3 billion in total available liquidity. Moreover, it is the only company with an investment-grade rating among the lodging REITs, having ratings of Baa3/Positive from Moody’s, BBB-/Stable from S&P Global and BBB/Stable from Fitch. This renders access to the debt market at favorable costs. Therefore, Host Hotels has ample financial flexibility for deploying capital for long-term growth opportunities while carrying out redevelopment initiatives.
HST’s Dividend Payouts
Solid dividend payouts are a massive enticement for REIT investors, and Host Hotels has remained committed to that. HST has increased its dividend seven times in the last five years and has a 41% payout ratio. Such efforts boost investors’ confidence in the stock. Check out Host Hotels & Resorts’ dividend history here.
Risks Likely to Affect HST’s Positive Trend
Host Hotels’ growth has been hindered by the slow recovery from the wildfires in Maui, a moderation in domestic leisure transient demand due to increased travel to international locations and a gradual post-pandemic rebound in specific markets, such as San Francisco.
Moreover, challenges in the supply chain have led to project delays across the United States, and a restrictive lending environment has made it difficult to obtain construction financing for future projects.
Stocks to Consider
Some better-ranked stocks from the REIT sector are Alpine Income Property Trust (PINE - Free Report) and Gladstone Commercial (GOOD - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Alpine Income’s 2024 FFO per share has moved 6.1% upward in the past month to $1.70.
The Zacks Consensus Estimate for Gladstone Commercial’s current-year FFO per share has moved 2.1% northward over the past month to $1.43.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.