Is FIFA World Cup Driving Host Hotels? - Analyst Blog

The ball starts rolling at FIFA World Cup 2014 today. The opening match will see Brazil v/s Croatia and as we wait to see who wins, one stock is already a clear winner. On Jun 11, Host Hotels & Resorts Inc. HST was upgraded to a Zacks Rank #2 (Buy) from Zacks Rank #3 (Hold), in anticipation of tourists teeming in for the football event.

This lodging real estate investment trust (REIT) has properties in Latin America that are expected to witness strong improvement in RevPAR (Revenue Per Available Room), with Rio de Janeiro gaining from increased leisure demand.

Moreover, Host Hotels & Resorts came up with encouraging first-quarter 2014 results. Adjusted funds from operations (FFO) per share of 33 cents exceeded the Zacks Consensus Estimate by 3 cents and rose by a nickel from the year-ago quarter. Results reflect a notable rise in RevPAR and food and beverage operations, in the comparable hotels.

The company also raised its 2014 adjusted FFO per share guidance to $1.41–$1.46 from $1.40–$1.44 guided earlier. The hotelier also increased its quarterly cash dividend by 7.1% sequentially to 15 cents per share, reflecting a hike in its dividend payout for the 14th consecutive quarter, since Mar 2011.

Improving market fundamentals and a solid portfolio of luxury and upscale hotels are expected to position the company well for future growth. Its West Coast market is expected to continue outperforming in the rest of the year with strong lodging demand and lower supply.

Owing to the bullish factors, over the last 60 days, the stock witnessed significant estimate revisions with 9 estimates moving north for 2014 and 12 estimates moving in the same direction for 2015. The Zacks Consensus Estimate for FFO per share now stands at $1.45 per share for 2014 and $1.59 per share for 2015, reflecting year-over-year growth of 10.35% and 10.15%, respectively.

Additionally, the long-term earnings growth forecast for Host Hotels & Resorts is 8.30%. These made way for the upgrade in the rank.

Other Stocks to Consider

In addition to Host Hotels, once could also consider Chatham Lodging Trust CLDT, which currently has a Zacks Rank #1 (Strong Buy) and Pebblebrook Hotel Trust PEB that carries a Zacks Rank #2 (Buy). Moreover, considering the FIFA World Cup, another stock has grabbed our attention. It is one of the official World Cup sponsors, Johnson & Johnson JNJ which has also witnessed bullish revisions in estimates.

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.