Extended Stay (STAY) Q3 Earnings Miss Estimates, Shares Down

Extended Stay America, Inc. STAY reported mixed third-quarter 2019 results, wherein earnings lagged the Zacks Consensus Estimate but revenues beat the same. However, both the top and bottom lines decreased on a year-over-year basis due to decline in hotel operating margin and comparable company-owned RevPAR.

Notably, shares of the company fell nearly 5% in the after-hour trading session, post the quarterly release.

Adjusted earnings during the quarter were 33 cents per share, missing the Zacks Consensus Estimate of 35 cents by 5.7% and declining 15.4% year over year. The downside was mainly due to lower revenues and hotel operating margin, partially offset by reduced depreciation expenses.

Extended Stay America, Inc. Price, Consensus and EPS Surprise

Extended Stay America, Inc. Price, Consensus and EPS Surprise

Extended Stay America, Inc. price-consensus-eps-surprise-chart | Extended Stay America, Inc. Quote

Detailed Revenue Discussion

Extended Stay reported total revenues of $332.7 million in the quarter, marginally surpassing the Zacks Consensus Estimate of $331 million. However, the reported figure declined 5.2% from year-ago figure of $351.1 million due to asset dispositions in 2018 and a decline in comparable company-owned RevPAR. When adjusted for asset disposition, its revenues fell 0.6% from the prior year.

Comparable system-wide RevPAR of $54.81 fell 1.3% on a year-over-year basis, owing to a 2% drop in average daily rate (ADR), offset by an increase of 70 basis points (bps) in occupancy.

Meanwhile, total company-owned RevPAR rose 1.1% from the prior-year quarter, whereas comparable company-owned RevPAR declined 1.4% to $56.66.

Behind the Headlines

In the quarter under review, Extended Stay’s hotel operating margin came in at 53.8%, reflecting a 170 bps decline from the prior-year quarter. Increase in hotel payroll and property insurance expenses, and property taxes, along with a decline in comparable company-owned RevPAR resulted in the downturn.

Adjusted EBITDA totaled $156.3 million, down 10% from the comparable year-ago period due to the above-mentioned headwinds.

Cash and cash equivalents as of Sep 30, 2019 was $489.8 million compared with $287.5 million on Dec 31, 2018. At the end of the third quarter, total debt (net of unamortized deferred financing costs and debt discounts) amounted to $2,639.5 million, up from $2,402.6 million at 2018-end.

Extended Stay invested $65.1 million in capital expenditures in the quarter under review. On Nov 6, the company’s board of directors announced cash distributions totaling 23 cents per share, payable on Dec 4, 2019 to its shareholders of record as of Nov 20, 2019. The company repurchased 4 million shares during the reported quarter for an aggregate purchase of $57.5 million and an additional 2 million shares for $28.8 million. At the end of the third quarter, total shares remaining under its share repurchase authorization were approximately $177 million.

Lowered 2019 View

Extended Stay now expects total revenues within $1,205-$1,215 million, down from $1,215-$1,230 million expected earlier. Moreover, comparable system-wide RevPAR is envisioned to be down 1.75-1.25% compared with a decline of 1-5% expected previously.

Adjusted EBITDA is projected between $535 million and $545 million, down from $550-$565 million projected earlier. Adjusted earnings per share are likely to be between 93 cents and $1.01 versus prior projection of $1-$1.10. Capital expenditure for the year is anticipated in the band of $235-$275 million, down from $270-$320 million expected earlier.

Zacks Rank & Peer Releases

Extended Stay currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Hilton Worldwide Holdings Inc. HLT reported third-quarter 2019 results, with earnings and revenues surpassing the respective Zacks Consensus Estimate. Its adjusted earnings of $1.05 per share surpassed the consensus mark of $1.02 and improved 13% on a year-over-year basis. Revenues totaled $2,395 million, which surpassed the consensus mark of $2,377 million. Moreover, the reported figure improved 6.3% from the year-ago level on higher comparable RevPAR.

Marriott Vacations Worldwide Corporation VAC reported mixed third-quarter 2019 results, with earnings missing the Zacks Consensus Estimate but revenues surpassing the same. Adjusted earnings of $1.97 per share missed the consensus mark of $2.04 by 3.4%. Nevertheless, the figure increased 38.7% year over year. Quarterly revenues amounted to $1,139 million, which beat the Zacks Consensus Estimate of $1,127 million by 1.1% and increased 51.9% from the year-ago figure.

Hyatt Hotels Corporation H reported better-than-expected third-quarter 2019 results. The company’s bottom line surpassed the Zacks Consensus Estimate for the 15th straight quarter and top line outpaced the same for the third consecutive quarter. Adjusted earnings came in at 37 cents per share, which outpaced the Zacks Consensus Estimate of 26 cents. Total revenues amounted to $1,215 million, which beat the Zacks Consensus Estimate of $1,178 million and improved 13.1% from the prior-year figure.

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