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Credit Suisse Downgrades Host Hotels To Neutral After Q2 Earnings


On July 30, Credit Suisse analyst Ian Weissman published a research note, "Cheap Stock But Too Much Noise to Warrant an OP Rating," downgrading shares of Host Hotel & Resorts Inc (NYSE: HST) from Outperform to Neutral.

Host reported Q2 earnings on July 30, and Weissman does not see any near-term catalysts that would send the stock up "materially" from its current price level.

He noted, that Host "is likely to continue dealing with drag from renovation displacement, softer results in NYC (12% of rooms); international overhang; and earnings drag from net dispositions."

Tale Of The Tape - Past Year


During the past 52 weeks, Host has traded in a range of $19.14 - $23.82 per share. Notably, on July 31, Deutsche Bank lowered its target price from $21 to $20 per share.

Credit Suisse - Host Hotel: Downgrade OP To Neutral, Lowered PT From $23 To $22

The new $22 target price represents a potential ~12.5 percent upside from the July 30, close of $19.55 per share and a 12-month total return of ~16.6 percent, including the 4.1 dividend yield.


The new price target "is a blend of [the CS] $23 forward NAV estimate including a 5% discount to reflect asset quality (50%), $23 EV/EBITDA multiple valuation (30%), and $19.50 DCF (20%)."

Credit Suisse - Host 2Q15 Takeaways

RevPAR Growth: came in 50 bps lower than Weissman expected, (up 4.8 percent), with FY2015E to in a range of 4.5 to 5.5 percent.

Renovations: The disruptions will last through FY 2015, but management expects this to moderate during the 4Q15.

Share Buybacks: Credit Suisse is modeling $300 million of additional buybacks, likely to be funded from the sale of non-core assets.

Credit Suisse - Estimate Reductions

Credit Suisse lowered its normalized 2015E FFO by $0.03 to $1.53 (vs $1.52-$1.55), while its 2016E FFO was reduced by $0.02 to $1.75.


The revised Credit Suisse estimates are based on "5.0% RevPAR growth, a 50bps increase in margins, $300M in incremental stock buybacks, and $300M of dispositions (@ 7.5% cap rate)."

Related Link: Credit Suisse Bullish On Hotel REITs: 4 Outperform Picks In '20% Club'

Investor Takeaway

On May 26, 2015 Credit Suisse reduced the price targets each of the lodging names under coverage, with the exception of Host Hotel.


The current reduction of the HST target price by ~4.3 percent, is more or less "in-line" with the views held by Credit Suisse regarding the rest of the lodging REITs under coverage back in late May.

Latest Ratings for HST

Feb 2021JefferiesDowngradesBuyHold
Jan 2021Morgan StanleyMaintainsEqual-Weight
Jan 2021Raymond JamesDowngradesOutperformMarket Perform

View More Analyst Ratings for HST
View the Latest Analyst Ratings


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Posted-In: Credit SuisseAnalyst Color REIT Downgrades Price Target Analyst Ratings General Real Estate

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