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Extended Stay (STAY) Q2 Earnings: Disappointment in Store?

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Extended Stay America, Inc. is scheduled to report second-quarter 2016 results on Jul 28, before the opening bell.

Last quarter, Extended Stay posted a positive earnings surprise of 8.33%. In fact, the company’s earnings surpassed the Zacks Consensus Estimate in all of the last four quarters, with an average beat of 9.95%.

Let’s see how things are shaping up for this announcement.

JAKKS PACIFIC Price and EPS Surprise

JAKKS PACIFIC Price and EPS Surprise | JAKKS PACIFIC Quote

Factors Likely to Influence this Quarter

Extended Stay has been renovating its properties lately which has hurt the company's occupancy rates over the past few quarters. We expect this trend to continue in the to-be reported quarter as well. Further, costs related to these renovations would continue to hurt profits. Meanwhile, the company’s lack of exposure to the emerging markets might further limit its revenue growth potential in the second quarter.

However, the transformational initiatives undertaken by Extended Stay would continue to aid RevPAR as hotels that have already been renovated are witnessing increases in ADR and occupancy levels. Moreover, various sales and marketing initiatives, geographically diverse portfolio and limited exposure to inbound international travel are likely to drive the top line.

Earnings Whispers

Our proven model does not conclusively show that Extended Stay is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.

Zacks ESP: Extended Stay has an Earnings ESP of -3.57%. This is because the Most Accurate estimate stands at 27 cents whereas the Zacks Consensus Estimate is pegged higher at 28 cents.

Zacks Rank: Extended Stay has a Zacks Rank #4 (Sell). Please note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Vail Resorts Inc. (MTN - Free Report) has an earnings ESP of +1.21% and a Zacks Rank #2.

Red Lion Hotels Corporation has an earnings ESP of +100.00% and a Zacks Rank #3.

Wynn Resorts Ltd. (WYNN - Free Report) has an earnings ESP of +1.03% and a Zacks Rank #3.

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