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Extended Stay (STAY) Q2 Earnings Miss, Revenues Top Estimates

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Extended Stay America, Inc. reported mixed second-quarter 2019 results, wherein earnings missed the Zacks Consensus Estimate but revenues surpassed the same. However, the company’s top and bottom lines declined on a year-over-year basis.

Adjusted earnings were 32 cents per share, missing the Zacks Consensus Estimate by one cent. The bottom line also declined 8.6% year over year due to lower hotel operating margin, partially offset by reduced depreciation, interest and corporate overhead expenses.

Detailed Revenue Discussion

Total revenues of $323.7 million in the second quarter surpassed the Zacks Consensus Estimate of $319 million. However, the top line declined 3.8% on a year-over-year basis due to asset dispositions. When adjusted for asset disposition, the company’s revenues rose 1% year over year.

Also, comparable system-wide RevPAR gained 0.1% on a year-over-year basis. The improvement can be attributed to an increase of 220 basis points in occupancy, overshadowed by a 2.7% fall in average daily rate (ADR). However, total company-owned RevPAR rose 2.5%, whereas comparable company-owned RevPAR declined 0.1% to $55.66 in the second quarter.

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

 

Behind the Headlines

Extended Stay’s hotel operating margin in the quarter under review was 54.4%, reflecting a 200-bps decline from the prior-year quarter. Increase in payroll expenses and decline in comparable system-wide RevPAR led to the downturn. Net income totaled $59.7 million compared with $65.6 million in second-quarter 2018, mirroring a decline of 9%. This downside can be attributed to the decrease in comparable system-wide RevPAR and rise in operating expenses.

Cash and cash equivalents as of Jun 30, 2019, was $288.6 million compared with $287.5 million at the end of Dec 31, 2018. Total shareholders’ equity at the end of the second quarter was $1,313 million. As of Jun 30, 2019, total debt (net of unamortized deferred financing costs and debt discounts) amounted to $2,400.6 million, down from $2,402.6 million at the end of Dec 31, 2018.

Extended Stay invested roughly $57.6 million as capital expenditure in the quarter under review. On Aug 6, the company’s board of directors announced cash distributions totaling 23 cents per share.

2019 Outlook

Extended Stay expects total revenues to be $1,215-$1,230 million, down from $1,230-$1,250 million mentioned earlier. Moreover, comparable system-wide RevPAR is envisioned to be down 1% to up 5% as compared with the flat to up 2% range stated previously. Adjusted EBITDA is projected between $550 and $565 million, down from $560-$580 million mentioned earlier. Capital expenditure for the year is anticipated to be $270-$320 million, down from $310-$360 million stated earlier.

Zacks Rank & Peer Releases

Extended Stay currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Marriott (MAR - Free Report) reported mixed second-quarter 2019 results, wherein earnings met the Zacks Consensus Estimate but revenues lagged the same. Notably, this marked the sixth straight quarter of revenue miss. Adjusted earnings of $1.56 per share were in line with Zacks Consensus Estimate but declined 9.3% year over year. The company’s earnings in the year-ago quarter included gain of 26 cents from an asset sale.

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