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Can Cost-Cut Efforts Favor Extended Stay (STAY) Q1 Earnings?
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Extended Stay America, Inc. is scheduled to report first-quarter 2018 results on Apr 26, after market close.
While the company’s expense containment and cost-saving measures are expected to have favored first-quarter earnings, revenues in the quarter might have been affected by a shift in Easter date. Also, limited international presence continues to be a headwind for the company’s revenues.
Notably, shares of Extended Stay have gained 17% in the past year, underperforming the industry’s growth of 30.9% in the same time period.
Let’s discuss the factors that are likely to influence the company’s first-quarter results.
Efficient Cost Management to Favor Earnings
Extended Stay’s operating model posits a low-cost capital structure that has low fixed and variable costs. Even though an ongoing increase in wages can substantially put pressure on the company’s expenses, its cost-saving measures are expected to have driven margins in the quarter.
In 2017, Extended Stay’s operating profit increased 0.7% year over year and the trend is likely to continue in the first quarter as well. Subsequently, the Zacks Consensus Estimate for first-quarter earnings is pegged at 17 cents, suggesting 13.3% increase from the year-ago quarter.
Tricky Top-Line Scenario
Extended Stay looks to drive its revenue per available room (ReVPAR) by providing suitable services to value-conscious business travelers. In 2017, its ReVPAR increased 1.7% from the prior-year quarter on 1.1% growth in Average Daily Rate (ADR) and 40 basis points (bps) expansion in occupancy. Management believes that this upside trend will continue in the first quarter of 2018 by 1-3%.
However, the company predicts 50-75 bps negative impact on ReVPAR due to a shift in Easter date. Moreover, the company’s lack of exposure in emerging markets might limit its revenue growth potential.
The consensus estimate for revenues in the first quarter is pegged at $289.78 million, reflecting a decline of 0.4% from the prior-year quarter.
Our Quantitative Model Predicts a Beat
Extended Stay has the right combination of two main ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.
Zacks ESP: The company has an Earnings ESP of +3.50%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Extended Stay America, Inc. Price and EPS Surprise
Here are some other stocks from the Consumer Discretionary sector that investors may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Wynn Resorts (WYNN - Free Report) has an Earnings ESP of +5.45% and a Zacks Rank #3. The company is scheduled to report quarterly numbers on Apr 24.
Royal Caribbean (RCL - Free Report) has an Earnings ESP of +0.50% and carries a Zacks Rank #2 (Buy). The company is slated to report quarterly figures on Apr 26.
Hilton (HLT - Free Report) has an Earnings ESP of +3.09% and a Zacks Rank #3. The company is scheduled to report quarterly numbers on Apr 26.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6% and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
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Can Cost-Cut Efforts Favor Extended Stay (STAY) Q1 Earnings?
Extended Stay America, Inc. is scheduled to report first-quarter 2018 results on Apr 26, after market close.
While the company’s expense containment and cost-saving measures are expected to have favored first-quarter earnings, revenues in the quarter might have been affected by a shift in Easter date. Also, limited international presence continues to be a headwind for the company’s revenues.
Notably, shares of Extended Stay have gained 17% in the past year, underperforming the industry’s growth of 30.9% in the same time period.
Let’s discuss the factors that are likely to influence the company’s first-quarter results.
Efficient Cost Management to Favor Earnings
Extended Stay’s operating model posits a low-cost capital structure that has low fixed and variable costs. Even though an ongoing increase in wages can substantially put pressure on the company’s expenses, its cost-saving measures are expected to have driven margins in the quarter.
In 2017, Extended Stay’s operating profit increased 0.7% year over year and the trend is likely to continue in the first quarter as well. Subsequently, the Zacks Consensus Estimate for first-quarter earnings is pegged at 17 cents, suggesting 13.3% increase from the year-ago quarter.
Tricky Top-Line Scenario
Extended Stay looks to drive its revenue per available room (ReVPAR) by providing suitable services to value-conscious business travelers. In 2017, its ReVPAR increased 1.7% from the prior-year quarter on 1.1% growth in Average Daily Rate (ADR) and 40 basis points (bps) expansion in occupancy. Management believes that this upside trend will continue in the first quarter of 2018 by 1-3%.
However, the company predicts 50-75 bps negative impact on ReVPAR due to a shift in Easter date. Moreover, the company’s lack of exposure in emerging markets might limit its revenue growth potential.
The consensus estimate for revenues in the first quarter is pegged at $289.78 million, reflecting a decline of 0.4% from the prior-year quarter.
Our Quantitative Model Predicts a Beat
Extended Stay has the right combination of two main ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.
Zacks ESP: The company has an Earnings ESP of +3.50%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Extended Stay has a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Extended Stay America, Inc. Price and EPS Surprise
Extended Stay America, Inc. Price and EPS Surprise | Extended Stay America, Inc. Quote
Other Stocks to Consider
Here are some other stocks from the Consumer Discretionary sector that investors may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Wynn Resorts (WYNN - Free Report) has an Earnings ESP of +5.45% and a Zacks Rank #3. The company is scheduled to report quarterly numbers on Apr 24.
Royal Caribbean (RCL - Free Report) has an Earnings ESP of +0.50% and carries a Zacks Rank #2 (Buy). The company is slated to report quarterly figures on Apr 26.
Hilton (HLT - Free Report) has an Earnings ESP of +3.09% and a Zacks Rank #3. The company is scheduled to report quarterly numbers on Apr 26.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6% and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>