Key Takeaways HST gained 13.9% in three months, sharply outperforming the lodging industry's 1.2% decline.HST is seeing stronger group and transient demand, lifting occupancy and RevPAR across key U.S. markets.HST's capital recycling, $2.2B liquidity, and special dividend signal balance sheet strength and discipline.Shares of Host Hotels & Resorts Inc. (HST) have gained 13.9% in the past three months against the industry’s fall of 1.2%.Host Hotels, which has a portfolio of luxury and upper-upscale hotels in ...

Core Viewpoint - Host Hotels & Resorts, Inc. is a significant entity in the lodging REIT sector, recognized for its strong financial performance and potential for growth, with a recent price target increase from Deutsche Bank indicating positive market sentiment [1][6]. Financial Performance - Host Hotels exhibits strong financial metrics, including a high return on equity (ROE) and robust cash flow, positioning it favorably among peers like Arista Networks and Corning Incorporated [2][6]. - The current stock price of HST is $18.34, reflecting a slight decrease of 0.54%, with a market capitalization of approximately $12.61 billion [5]. Market Context - The broader equity markets are performing well, supported by positive economic indicators such as an increase of 50,000 nonfarm payrolls and a decrease in the unemployment rate to 4.4%, which has fostered optimism about potential interest rate cuts in 2026 [3]. Investment Analysis - Zacks Investment Research is assessing whether Host Hotels may be undervalued, utilizing the Zacks Rank system to analyze earnings estimates and revisions, and highlighting HST as a potential value stock [4][6].

Core Insights - Host Hotels & Resorts Inc. (HST) shares have increased by 9.8% over the past month, outperforming the industry which saw a decline of 0.6% [1][8] - The company is expected to experience RevPAR growth due to a solid portfolio of upscale hotels and strong demand drivers, with an anticipated comparable hotel RevPAR growth of approximately 3% in 2025 [3][8] Financial Performance - The Zacks Consensus Estimate for Host Hotels' 2025 FFO per share has been revised upward by one cent to $2.05 [2] - The company has a healthy balance sheet with $2.2 billion in total available liquidity as of September 30, 2025, and holds an investment-grade rating from Moody's, S&P Global, and Fitch [6][9] Strategic Initiatives - Host Hotels is actively engaged in a capital-recycling program, disposing of non-strategic assets and reinvesting in premium properties, with total dispositions amounting to $1.8 billion and acquisitions of $3.3 billion from 2021 to November 5, 2025 [5] - The company incurred $454 million in capital expenditures in the first nine months of 2025, with expectations for total capital expenditures to be between $605 million and $640 million for the year [4] Dividend Policy - Host Hotels announced a special dividend of 15 cents per share, in addition to a quarterly cash dividend of 20 cents per share, with a total payout scheduled for January 15, 2026 [10] - The company has increased its dividend nine times over the last five years, maintaining a payout ratio of 40%, which enhances investor confidence [10]

Core Insights - Host Hotels & Resorts, Inc. (HST) reported third-quarter adjusted funds from operations (AFFO) per share of 35 cents, exceeding the Zacks Consensus Estimate of 33 cents, but down 2.8% year-over-year [1][9] - The company generated total revenues of $1.33 billion, meeting the Zacks Consensus Estimate, with a slight year-over-year increase driven by comparable hotel RevPAR growth [2][9] - HST raised its outlook for 2025 AFFO per share to $2.03 from the previous midpoint of $2, with expectations for comparable hotel RevPAR at $227 million and adjusted EBITDAre estimated at $1.73 billion [11] Financial Performance - Comparable hotel RevPAR was $208.07, showing a marginal increase from the prior year, primarily due to higher room rates and strong transient leisure demand [3] - Comparable hotel EBITDA was $309.4 million, down 1% year-over-year, with a margin decrease of 50 basis points to 23.9% due to rising wages and benefit expenses [4] - The average room rate increased to $299.07 from $290.27 in the previous year, while the average occupancy rate was 69.6%, down 190 basis points year-over-year [4] Business Segments - Room nights for the contract business increased by 11.6% year-over-year, while transient and group businesses saw declines of 1.2% and 7.8%, respectively [5] - The transient, group, and contract businesses accounted for approximately 60%, 36%, and 4% of total room sales in 2024 [5] Capital Expenditure and Investments - Host Hotels' capital expenditure for the year-to-date through September 30, 2025, totaled $454 million, with allocations for return on investment projects, renewal and replacement expenditures, and property damage reconstruction [10] - The company agreed with Marriott International on a second transformational capital program for four properties, with total expenditures expected between $300 million and $350 million through 2029 [6] Balance Sheet and Credit Rating - As of September 30, 2025, Host Hotels had cash and cash equivalents of $539 million, up from $490 million at the end of June 2025, with total liquidity of $2.2 billion [7] - Moody's upgraded the company's credit rating to Baa2 with a stable outlook during the third quarter of 2025 [7]

Portfolio Highlights - Xenia Hotels & Resorts owns a diverse portfolio of 30 luxury and upper-upscale hotels and resorts, primarily in Top 25 U S markets and key leisure destinations[7] - The portfolio is diversified across 16 brands, with a focus on uniquely positioned luxury and upper-upscale hotels and resorts[12] - No single market contributed more than 17% of the company's trailing twelve months (TTM) EBITDA as of September 30, 2025, with Orlando, FL being the largest market[18] - Approximately 75% of the portfolio's demand mix comes from business transient and group segments[20] Financial Performance and Outlook - As of September 30, 2025, the company had approximately $188 million in unrestricted cash and $500 million in line of credit availability, resulting in total liquidity of approximately $688 million[101] - The company repurchased 6,656,706 shares of common stock YTD 2025 at a weighted-average price of $12 59 per share, for a total consideration of approximately $83 8 million[105] - The company's 3Q25 dividend was $0 14 per share, representing an approximate 17% increase compared to the same time last year[112] - The company's preliminary October Same-Property RevPAR increased by approximately 5 8% compared to October 2024[115] Strategic Initiatives - The company expects $3-5 million of incremental Hotel EBITDA upon stabilization from the Food & Beverage Relaunch at W Nashville[48] - The transformative renovation of Grand Hyatt Scottsdale Resort is expected to drive RevPAR to approximately $300 upon stabilization[93]

Market Overview - The broader equity markets have experienced a sharp uptrend, reaching an all-time high, driven by a solid start to the earnings season despite ongoing government shutdown concerns [1] - Investors are optimistic that the government shutdown will have minimal impact on the U.S. economy, allowing the stock market to progress [1] Federal Reserve and Investment Strategy - Investors anticipate that current market conditions will not prevent another rate cut by the Federal Reserve later this month [2] - A "wait-and-see" approach is being adopted by investors, focusing on "cash cow" stocks that offer higher returns [2] Importance of Return on Equity (ROE) - ROE is a critical financial metric that helps investors identify profit-generating companies and assess their financial health [3][4] - A high ROE indicates effective cash reinvestment at high rates of return, distinguishing strong companies from weaker ones [3][4] Stock Screening Parameters - Stocks are screened based on criteria including Cash Flow greater than $1 billion and ROE greater than the industry average [5] - Additional metrics include Price/Cash Flow lower than the industry average and Return on Assets (ROA) greater than the industry average [6] Selected Stocks with High ROE - The TJX Companies, Host Hotels, Corning, Banco Bilbao, and AppLovin are highlighted for their strong profitability and high ROE [7] - The TJX Companies has a long-term earnings growth expectation of 9.7% and a trailing four-quarter earnings surprise of 5.4% [9] - Host Hotels has a trailing four-quarter earnings surprise of 9.5% and operates luxury hotels under premium brands [11] - Corning has a long-term earnings growth expectation of 18.2% and a trailing four-quarter earnings surprise of 4.7% [12] - Banco Bilbao has a long-term earnings growth expectation of 10.3% and a trailing four-quarter earnings surprise of 7.4% [13] - AppLovin boasts a long-term earnings growth expectation of 20% and a trailing four-quarter earnings surprise of 22.4% [14]

Group 1 - Tarsadia Capital, holding a 3.4% economic interest in Sunstone Hotel Investors, has urged the board to initiate a dual process for either selling the entire company or liquidating its assets to maximize shareholder value [1] - The letter emphasizes that Sunstone's current position as a subscale lodging REIT is unsustainable and calls for immediate changes in the board to explore strategic alternatives [1] - Tarsadia Capital has expressed frustration over the board's inaction regarding the company's persistent undervaluation in public markets and is prepared to advocate for change among fellow shareholders if necessary [1]

Core Insights - Host Hotels & Resorts Inc. (HST) shares have increased by 9.8% over the past three months, outperforming the industry average of 1.7% [1] - The company reported second-quarter adjusted funds from operations (AFFO) per share of 58 cents, exceeding the Zacks Consensus Estimate of 51 cents, and reflecting a 1.8% increase year-over-year [2] - The company anticipates comparable hotel RevPAR growth of 1.5% to 2.5% in 2025, driven by strong demand in group travel and business transient segments [4] Financial Performance - HST's revenue growth is attributed to higher year-over-year comparable hotel revenue per available room (RevPAR) [2] - The company has executed $1.6 billion in asset dispositions and $3.3 billion in acquisitions since 2021, demonstrating effective capital management [6][7] Capital Management - HST has a strategic capital-recycling program that disposes of non-strategic assets and reinvests in premium properties, enhancing portfolio quality [6] - The company incurred $298 million in capital expenditures in the first half of 2025, with total expected capital expenditures for the year between $590 million and $660 million [5] Balance Sheet Strength - As of June 30, 2025, HST had $2.3 billion in total available liquidity, a weighted average debt maturity of 5.4 years, and a weighted average interest rate of 4.9% [7] - HST holds an investment-grade rating among lodging REITs, which allows access to debt markets at favorable costs [8] Dividend Policy - HST has increased its dividend eight times over the past five years, maintaining a payout ratio of 40%, which enhances investor confidence [9] Analyst Outlook - Analysts have a positive outlook on HST, with a Zacks Rank of 3 (Hold) and a revised consensus estimate for 2025 FFO per share increased by 2.6% to $1.97 [10]

Group 1 - Lodging REITs are influenced by cyclical factors due to short-term market-to-market leasing and seasonal consumer behavior [1] - Current economic uncertainty raises concerns about the viability of lodging REITs, leading to a cautious stance on investment in this sector [1] Group 2 - Pearl Gray is an independent market research firm that specializes in systematic analysis, focusing on Bonds, Preferreds, and REITs [1] - The primary sectors of interest for Pearl Gray include Financials and Real Estate, with a mission to identify actionable total return ideas [1]

Financial Data and Key Metrics Changes - The company reported a net loss attributable to common stockholders of $2.5 million or $0.04 per diluted share for the quarter [14] - Adjusted EBITDAre for the quarter was $63 million, with total assets at $2.1 billion and total loans of $1.2 billion [14][15] - The company achieved a comparable RevPAR of $400, reflecting a 4.2% increase year-over-year, marking the highest quarterly RevPAR in its history [8][9] Business Line Data and Key Metrics Changes - Comparable total hotel revenue increased by 4.4% year-over-year, while comparable hotel EBITDA was $70.8 million, representing a 5.3% increase [9] - The resort portfolio reported a comparable RevPAR of $800, a 1.9% increase, and combined comparable hotel EBITDA of $62 million, a 2% increase [9] - Urban hotels delivered a comparable RevPAR growth of 11.3%, with the Capitol Hilton achieving a 19.3% year-over-year RevPAR growth due to the presidential inauguration [10] Market Data and Key Metrics Changes - Group revenue increased by 31% compared to the prior year period, indicating strong demand and effective sales strategies [21] - The urban assets delivered a 10% increase in comparable total revenue and a 39% increase in comparable hotel EBITDA [24] - Group room revenue pace for 2025 is up 7%, with continued growth expected at 10% for 2026 [11][24] Company Strategy and Development Direction - The company successfully addressed its final 2025 debt maturity, resulting in a lower cost of capital and improved maturity schedule [7][12] - The company is focused on strategic reinvestment and brand alignment, with planned capital expenditures between $75 million and $95 million for 2025 [30] - The company is exploring asset sales, particularly upper upscale assets, to enhance shareholder value and potentially fund preferred equity redemptions and share buybacks [55][56] Management's Comments on Operating Environment and Future Outlook - Management noted that economic uncertainty rhetoric has dissipated, and booking pace remains strong, positioning the portfolio to outperform [7] - The company remains optimistic about the opportunities ahead, highlighting the resilience of its diversified portfolio [30] - Management expressed confidence in continued EBITDA growth due to effective cost containment measures and productivity improvements [42] Other Important Information - The company redeemed approximately $90 million of its non-traded preferred stock, representing about 20% of the original capital raise [13] - The company announced a quarterly common stock dividend of $0.05 per share, equating to an annual yield of approximately 10.4% [15] Q&A Session Summary Question: Any trends or variability worth calling out outside of PACE in light of macroeconomic volatility? - Management indicated that the portfolio is well insulated from macro headwinds, with a slight shortening of the booking window but no significant impact on group performance [34][35] Question: How much inbound international exposure does the portfolio have? - The international inbound is a small part of the portfolio, with minimal impact observed, as some markets saw growth while others experienced slight declines [36][38] Question: What is the opportunity to grow margin in the near term? - Management is optimistic about margin growth, citing improved productivity and effective cost containment measures [39][42] Question: Can you provide additional color on the Magnificent Mile conversion? - The conversion is expected to enhance asset value and performance, with minimal CapEx planned for public and meeting space renovations [43][44] Question: How much can you buy back in preferred redemptions? - The company can redeem preferred stock after two years, with timing and sequencing being the limiting factors for repurchases [50][52] Question: What is the update on asset sales and expected proceeds utilization? - Management noted increased buyer activity and plans to utilize proceeds for preferred equity redemptions, share buybacks, and retiring corporate convertible notes [56]