What's In Store For Extended Stay (STAY) In Q1 Earnings?

Extended Stay America, Inc. (NYSE:STAY) is scheduled to report first-quarter 2017 results on Apr 27, before the opening bell.

Last quarter, Extended Stay posted a positive earnings surprise of 42.86%. In fact, the company’s earnings surpassed the Zacks Consensus Estimate in all of the last four quarters, with an average beat of 16.95%.

Extended Stay America, Inc. Price and EPS Surprise

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

Factors Likely to Influence Q1 Results

Extended Stay has been renovating its properties lately, which has hurt its occupancy rates in the recent quarters. However, the trend is expected to improve in the to-be-reported quarter as the company has renovated most of its rooms. Nevertheless, the capital expenditures related to the same, although expected to be lower this quarter, will still persist.

Moreover, the company’s lack of exposure to the emerging markets might limit its revenue growth potential in the quarter. That said, the same also limits the company’s exposure to volatile oil markets, unfavorable currency impact and competition, which should boost results.

Meanwhile, the transformational initiatives undertaken by Extended Stay are expected tp continue aiding RevPAR (Revenue per Available Room) as hotels that have already been renovated are witnessing increase in Average Daily Rate (ADR) and occupancy levels. Additionally, various sales and marketing initiatives, and limited exposure to inbound international travel are likely to drive the top line. Also, the company expects its expense containment and cost savings measures to have supported the growth of favorable margins.

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. That is not the case here, as elaborated below.

Zacks ESP: Extended Stay has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 12 cents per share. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Extended Stay currently carries a Zacks Rank #3, which when combined with an ESP of 0.00% makes surprise prediction difficult.

Note that we caution against stocks with Zacks Ranks #4 or 5 (Sell rated) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some hotel companies that investors may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Hilton Worldwide Holdings Inc. (NYSE:HLT) has an Earnings ESP of +10.71% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

La Quinta Holdings Inc. (NYSE:LQ) has an Earnings ESP of +50.00% and a Zacks Rank #3.

Red Lion Hotels Corporation (NYSE:RLH) has an Earnings ESP of +3.33% and a Zacks Rank #3.

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