Great seasonal market gains due to vacationers and news of acquiring luxury hotels in Europe

Host Hotels & Resorts (HST) is the largest lodging real-estate investment trust and one of the biggest owners of luxury and upper-upscale hotels. After cutting its common quarterly to five cents from 20 cents in December, Host is omitting it altogether. However, it expects to pay a 2009 fourth-quarter dividend of 30 to 35 cents a common share, which may be in cash or a combination of cash and stock. With business travel off sharply and customers generally looking for lower-priced rooms, 82-year-old Host expects 2009 funds from operations (or FFO) in a range of 79 cents to 91 cents a share, well below analysts' consensus estimate of $1.12. Be that as it may, Robert W. Baird analyst David Loeb upgraded not only Host but Marriott (MAR) and Starwood (HOT) to Outperform because he believes they are "uniquely positioned among their peers -- most likely to survive the downturn and thrive in the upturn." He is cautious, though, about the hotel sector on a long-term basis and thinks "a sustained rally is likely at least a year away."

Sector Perform - Price 7.52 on Dec. 1
by RBC Capital Markets

HST appears well-positioned to weather the downturn from a liquidity standpoint, [despite] rapid deterioration in operating fundamentals over the past two months -- particularly in upper upscale and luxury sub-segments that comprise a significant portion of its property Ebitda [earnings before interest, taxes, depreciation and amortization]. But there now may be greater...earnings and Ebitda deterioration [ahead]. We still like HST's portfolio positioning and deem valuation on a replacement-cost basis exceedingly attractive, but the shares appear poised for a more in-line performance in FY09. Accordingly...[we] reduced our rating from Outperform. New target: 9. Market cap: $4 billion.

8.71%

regular dividend

Market Perform - Price: $12.52 on July 15
by Morgan Keegan

Host Hotels and Resorts reported Q2 FFO [funds from operations] of 56 cents a share, unchanged from...the year-ago period. [This] was one cent below our estimate and one cent above the Street consensus.... Management decreased its full-year 2008 FFO guidance from a range of $1.88-$1.98 per share to a new range of $1.75-$1.85 per share. Our 2008 FFO estimate is reduced from $1.96 to $1.79 and our 2009 estimate is reduced from $2.06 to $1.80. While we view HST's current valuation to be attractive, we are less confident about near-term prospects for the lodging sector. Suitability: speculative.


Outperform - Price: $12.52 on July 15
by Baird

We are maintaining our Outperform rating and are reducing our price target to $15 from $17. Despite the company's lowered outlook and our estimate reductions, we continue to see value and would be buyers at current levels. We view Host as well-positioned [to weather] the downturn, given the company's well-covered dividend and strong balance sheet. Suitability: average risk.

.20 special dividend

income

wanted the dividend and thought it might get bought out. Losing money

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