UBS cuts Host Hotels price target to $18, maintains neutral

Tuesday, UBS adjusted its price target on Host Hotels & Resorts (NASDAQ:HST) stock, lowering it to $18.00 from the previous target of $19.00. The investment firm sustained its Neutral rating on the stock. The revision comes in light of updated earnings estimates for the company’s 2025 EBITDA, now set at $1,613 million, a decrease from the prior forecast of $1,698 million. For context, Host Hotels’ current EBITDA stands at $1,515 million for the last twelve months. UBS cites ongoing difficulties in Hawaii and rising costs for labor and insurance as contributing factors to the reduced expectations. InvestingPro subscribers can access additional insights through the comprehensive Pro Research Report, which includes detailed analysis of the company’s operational metrics and peer comparisons.

Host Hotels had previously disclosed a significant impact on its operations in Hawaii, estimating a $75 million hit to EBITDA following the Maui wildfires. Pre-fire projections for 2024 EBITDA in Hawaii were anticipated at $172 million, factoring in gains from the renovation of the Fairmont Kea Lani. However, revised estimates suggest a likely figure closer to $120 million for 2024, which includes a $20 million boost from business interruption insurance not originally accounted for, as well as revenues from cancellation fees and the provision of accommodations to recovery and relief workers.

The firm highlighted that the group business in Maui, particularly within the incentive segment, tends to book well in advance. Consequently, this segment is not expected to recover in 2025. UBS now projects that Host Hotels will experience no year-over-year growth in Hawaii for 2025, a revision from earlier expectations that the company might recoup approximately half of the $75 million in lost EBITDA.

The revised price target and maintained rating reflect the firm’s stance in light of these updated financial projections and the challenges faced by Host Hotels in the Hawaii market. UBS’s analysis indicates that the path to recovery for the company’s Hawaiian operations may be more prolonged and uncertain than previously anticipated. Despite these challenges, InvestingPro data shows the company maintains a strong market position with a market capitalization of $11.97 billion and trades at a relatively low EBITDA valuation multiple, suggesting potential value opportunities for investors who can weather near-term volatility.

In other recent news, Host Hotels & Resorts Inc. is reportedly contemplating the sale of over 10 properties, including the Grand Hyatt San Francisco and the Coronado Island Marriott in California. This move aligns with CEO Jim Risoleo’s previous indications of potentially divesting "noncore" assets.

On the financial front, the company’s Q3 results revealed a 10% decrease in adjusted EBITDAre to $324 million and adjusted Funds From Operations (FFO) per share of $0.36. However, comparable hotel Revenue per Available Room (RevPAR) saw a 3.1% increase. The company has projected capital expenditures for 2024 to fall between $485 million and $580 million.

Despite the impact of Hurricanes Helene and Milton leading to the temporary closure of four properties, the company maintains an optimistic outlook. It anticipates comparable hotel total RevPAR growth of about 1% for the full year and an adjusted EBITDAre of $1.630 billion.

In a bid to enhance liquidity, Host Hotels & Resorts issued $700 million in senior notes, bringing the total available liquidity to $2.3 billion. These recent developments underscore the company’s strategic approach to asset management and financial resilience amid market fluctuations.

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