Shares of Host Hotels & Resorts Inc. (HST) scaled a new 52-week high of $23.55 on Nov 28. The stock closed at $23.24, reflecting a solid year-to-date return of 23.6%. The trading volume for the session was nearly 3.1 million shares.

This lodging real estate investment trust (“REIT”), which came up with encouraging results in the third quarter, boasts a superior portfolio that positions it well for the upcoming peak season. In fact, the company has the capability to explore good opportunities so as to gain from solid market fundamentals. The anticipation of a continued low interest rate helps further.

Therefore, despite scaling such high, we believe that this Zacks Rank #2 (Buy) stock with a long-term growth rate of 8.6%, can prove to be a good choice, given the improving lodging industry fundamentals.

Growth Drivers

Host Hotels came up with encouraging results in third-quarter 2014. It reported an earnings surprise of 6.25% as it benefited from a notable rise in comparable revenue per available room (RevPAR) and occupancy.

Going forward, we believe that the company’s solid portfolio of upscale hotels across vibrant markets has the necessary potential for significant capital appreciation. The U.S. West Coast market remains attractive with strong lodging demand and lower supply. The strategic portfolio-enhancement activities also bode well for the company’s long-term growth.

Moreover, while global economic hurdles continue to persist, the lodging sector is expected to benefit from the improving U.S. business as well as strong international travel and tourism volumes. The low oil price is an added advantage as it drives more travel, thereby encouraging tourism volumes.

On the other hand, this low oil price has led to anticipations of a moderate inflation. This fuels the projections of a continued low rate environment for an extended period, which is expected to particularly benefit the rate sensitive business of REITs.

Echoing similar sentiments, over the last 30 days, the Zacks Consensus Estimate for both 2014 and 2015 moved north. For 2014, it climbed 1.4% to $1.48 per share while for 2015, the same increased 1.2% to $1.64 per share.

Other REITs Scaling Highs

Other REITs that have also scaled 52-week highs on Nov 28 include The Macerich Co. (MAC), Taubman Centers, Inc. (TCO) and Kimco Realty Corp. (KIM).

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Read the Full Research Report on TCO


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