Host Hotels & Resorts (NYSE: HST) reported Q1 EPS of $0.25, $0.04 better than the analyst estimate of $0.21. Revenue for the quarter came in at $1.39 billion versus the consensus estimate of $1.4 billion.

Highlights

• Total revenues improved 3.3% for the quarter, driven by the acquisitions of four premier hotels since March 2018. Also helping drive the improvement in revenues was a 30 basis point increase in comparable Total RevPAR to $274 for the quarter, which includes all hotel-level revenues per available room.
• The Company increased its overall profitability, despite a comparable hotel RevPAR decline of 1.0% for the quarter on a constant dollar basis. The decline in RevPAR was primarily driven by the Marriott transformational capital program and the effect of the government shutdown.
• Net income and earnings per share of $189 million and $0.25, respectively, were affected by a reduction in gains on sales of assets compared to the first quarter of 2018. However, the Company experienced strong growth in Adjusted EBITDAre of 9.7% to $406 million and Adjusted FFO per share of 11.6% to $0.48 per share.

James F. Risoleo, President and Chief Executive Officer, said, “Our first quarter results reflect our proven ability to drive operational outperformance as well as the scale and strength of Host Hotels’ integrated investment platform. Our margin performance for the quarter is nothing short of remarkable. We are very pleased to report a beat and raise quarter and to raise net income, Adjusted EBITDAre and Adjusted FFO per share guidance for the full year. Our disciplined and strategic capital allocation decisions have significantly enhanced the quality of our portfolio and we remain focused on value-enhancing growth opportunities to complement our collection of iconic and irreplaceable assets. As discussed last quarter, we have nearly $2.5 billion of investment capacity that can be comfortably deployed while maintaining our commitment to our investment-grade balance sheet. We do not intend to move higher than our targeted leverage range, nor do we intend to invest beyond that capacity.”

2019 Outlook

For 2019, the Company’s forecast for comparable hotel RevPAR growth is 0% to 2.0%. The RevPAR guidance reflects an estimated 45 basis points of disruption impact from the incremental capital expenditures associated with the Marriott transformational capital program. However, the estimated effect to earnings caused by these expenditures is offset by the operating profit guarantees provided by Marriott. The Company expects to receive $23 million of operating profit guarantees in 2019, of which $10 million is included in comparable hotel EBITDA, to offset the disruption to operations caused by the incremental spend on those properties.

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