A month has gone by since the last earnings report for Extended Stay America . Shares have added about 22.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Extended Stay America due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Extended Stay Q4 Earnings & Revenues Top Estimates
Extended Stay reported impressive fourth-quarter 2020 results, wherein earnings and revenues beat the Zacks Consensus Estimate. The top line declined on a year-over-year basis, owing to a drop in comparable company-owned RevPAR due to the coronavirus outbreak. However, the bottom line improved from the year-ago quarter.
Nonetheless, the company witnessed a sequential improvement in RevPAR in each month of fourth-quarter 2020. In this regard, Extended Stay America’s president and CEO Bruce Haase stated, “Through last week, Extended Stay America has now had 65 consecutive weeks of RevPAR index gains dating back to well before the pandemic, demonstrating the growing strength of our model relative to the overall lodging industry.”
Earnings & Revenue Discussion
During the fourth quarter, adjusted earnings per share of 16 cents not only beat the Zacks Consensus Estimate of 3 cents but also surged 14.3% from 14 cents reported in the prior-year quarter. The upside can be primarily attributed to an income tax benefit, decline in corporate overhead expense and a reduction in paired shares outstanding. However, this was partially offset by a decline in comparable system-wide RevPAR.
For the quarter under review, total revenues came in at $259.3 million, beating the consensus mark of $250 million by 3.7%. However, the top line declined 8.8% on a year-over-year basis primarily due to the negative impacts of COVID-19.
Comparable system-wide RevPAR of $42.46 fell 9.4% on a year-over-year basis owing to a 7.3% drop in average daily rate and a 170-basis point (bps) decrease in occupancy rate.
Meanwhile, comparable company-owned RevPAR fell 9.9% to $43.28 during the fourth quarter compared with $48.06 in the prior-year quarter.
Operating Highlights
In the quarter under review, Extended Stay’s hotel operating margin came in at 42.5%, reflecting a decline of 580 bps from the prior-year quarter. The downside was primarily due to a fall in RevPAR (owing to the pandemic) as well as a rise in hotel operating expenses.
Adjusted EBITDA totaled $89.3 million, down 17.9% from the comparable year-ago period due to a decline in comparable system-wide RevPAR.
Balance Sheet
Cash and cash equivalents as of Dec 31, 2020, were $396.8 million compared with $346.8 million on Dec 31, 2019. At the end of the fourth quarter, total debt (net of unamortized deferred financing costs and debt discounts) amounted to $2,683.6 million, up from $2,639.8 million at 2019-end.
Extended Stay’s capital expenditures in the quarter under review came in at $47.7 million. Notably, renovation capital of $7.3 million and new hotel development capital of $13.9 million were included in the same.
Coming to share repurchases, the company did not repurchase any Paired Shares during the fourth quarter of 2020. As of Dec 31, 2020, total shares remaining under its share repurchase authorization were approximately $101.1 million.
Unit Developments
During the fourth quarter, the company opened two company-owned hotel and seven franchised hotels.
As of Dec 31, 2020, the company had a pipeline of 56 hotels out of which eight hotels were company-owned and 48 hotels were third-party related. Altogether, the hotels have approximately 6,800 rooms.
2020 Highlights
Total revenues in 2020 came in at $1,042.3 million, down 14.4% from $1218.2 million in 2019. Adjusted EBITDA in 2020 came in at $374.1 million compared with $535 million in 2019. Net income in 2020 was $96.3, down 41.7% from $165.1 million in 2019. Adjusted earnings per share in 2020 came in at 37 cents compared with 95 cents in 2019.
2021 Outlook
For the first quarter of 2021, the company expects comparable system-wide RevPAR in the range of (6%) to (3%). Adjusted EBITDA is projected in the band of $78 to $84 million. Net loss for first quarter 2021 is expected in the range of $8 to $4 million.
For 2020, the company expects capital expenditures in the band of $155-$175 million and depreciation expenses between $202 million and $207 million. Net interest expenses are anticipated in the range of $126-$130 million. The company also expects effective tax rate between 10% and 12%.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -147.62% due to these changes.
VGM Scores
Currently, Extended Stay America has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Extended Stay America has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Extended Stay America (STAY) Up 22.7% Since Last Earnings Report?
A month has gone by since the last earnings report for Extended Stay America . Shares have added about 22.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Extended Stay America due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Extended Stay Q4 Earnings & Revenues Top Estimates
Extended Stay reported impressive fourth-quarter 2020 results, wherein earnings and revenues beat the Zacks Consensus Estimate. The top line declined on a year-over-year basis, owing to a drop in comparable company-owned RevPAR due to the coronavirus outbreak. However, the bottom line improved from the year-ago quarter.
Nonetheless, the company witnessed a sequential improvement in RevPAR in each month of fourth-quarter 2020. In this regard, Extended Stay America’s president and CEO Bruce Haase stated, “Through last week, Extended Stay America has now had 65 consecutive weeks of RevPAR index gains dating back to well before the pandemic, demonstrating the growing strength of our model relative to the overall lodging industry.”
Earnings & Revenue Discussion
During the fourth quarter, adjusted earnings per share of 16 cents not only beat the Zacks Consensus Estimate of 3 cents but also surged 14.3% from 14 cents reported in the prior-year quarter. The upside can be primarily attributed to an income tax benefit, decline in corporate overhead expense and a reduction in paired shares outstanding. However, this was partially offset by a decline in comparable system-wide RevPAR.
For the quarter under review, total revenues came in at $259.3 million, beating the consensus mark of $250 million by 3.7%. However, the top line declined 8.8% on a year-over-year basis primarily due to the negative impacts of COVID-19.
Comparable system-wide RevPAR of $42.46 fell 9.4% on a year-over-year basis owing to a 7.3% drop in average daily rate and a 170-basis point (bps) decrease in occupancy rate.
Meanwhile, comparable company-owned RevPAR fell 9.9% to $43.28 during the fourth quarter compared with $48.06 in the prior-year quarter.
Operating Highlights
In the quarter under review, Extended Stay’s hotel operating margin came in at 42.5%, reflecting a decline of 580 bps from the prior-year quarter. The downside was primarily due to a fall in RevPAR (owing to the pandemic) as well as a rise in hotel operating expenses.
Adjusted EBITDA totaled $89.3 million, down 17.9% from the comparable year-ago period due to a decline in comparable system-wide RevPAR.
Balance Sheet
Cash and cash equivalents as of Dec 31, 2020, were $396.8 million compared with $346.8 million on Dec 31, 2019. At the end of the fourth quarter, total debt (net of unamortized deferred financing costs and debt discounts) amounted to $2,683.6 million, up from $2,639.8 million at 2019-end.
Extended Stay’s capital expenditures in the quarter under review came in at $47.7 million. Notably, renovation capital of $7.3 million and new hotel development capital of $13.9 million were included in the same.
Coming to share repurchases, the company did not repurchase any Paired Shares during the fourth quarter of 2020. As of Dec 31, 2020, total shares remaining under its share repurchase authorization were approximately $101.1 million.
Unit Developments
During the fourth quarter, the company opened two company-owned hotel and seven franchised hotels.
As of Dec 31, 2020, the company had a pipeline of 56 hotels out of which eight hotels were company-owned and 48 hotels were third-party related. Altogether, the hotels have approximately 6,800 rooms.
2020 Highlights
Total revenues in 2020 came in at $1,042.3 million, down 14.4% from $1218.2 million in 2019. Adjusted EBITDA in 2020 came in at $374.1 million compared with $535 million in 2019. Net income in 2020 was $96.3, down 41.7% from $165.1 million in 2019. Adjusted earnings per share in 2020 came in at 37 cents compared with 95 cents in 2019.
2021 Outlook
For the first quarter of 2021, the company expects comparable system-wide RevPAR in the range of (6%) to (3%). Adjusted EBITDA is projected in the band of $78 to $84 million. Net loss for first quarter 2021 is expected in the range of $8 to $4 million.
For 2020, the company expects capital expenditures in the band of $155-$175 million and depreciation expenses between $202 million and $207 million. Net interest expenses are anticipated in the range of $126-$130 million. The company also expects effective tax rate between 10% and 12%.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -147.62% due to these changes.
VGM Scores
Currently, Extended Stay America has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Extended Stay America has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.