Extended Stay America Loss Narrows - Update

(RTTNews) - Hotels operator Extended Stay America Inc. (STAY) Wednesday reported a smaller loss for the fourth quarter, helped by about 7 percent growth in revenue, lower interest expense and income tax benefit. However, revenues for the quarter came in short of Wall Street estimates.

Extended Stay provided its revenue guidance for 2014, the midpoint of which is indicated to miss current Street expectations. Shares of the company dropped over four percent in morning trade on the New York Stock Exchange.

CEO Jim Donald said the recent quarter and the current three-month period were somewhat impacted by renovation displacements, inclement weather and the limitations of revenue management capabilities.

Extended Stay, which went public in November operates company-branded hotels in North America.

The Charlotte, North Carolina based company's fourth-quarter net loss to stockholders narrowed to $11 million from $34.7 million last year.

Revenue for the quarter climbed to $268.8 million from $250.6 million in the prior year. Ten analysts had a consensus revenue estimate of of $270.9 million.

Past acquisitions boosted revenue by $5.5 million for the quarter.

Revenue Per Available Room or RevPAR for the quarter was up 5.7 percent to $37.82. This was due to an increase in average daily rate, or ADR, of 4.5 percent and a climb in occupancy to 70.5 percent from 69.6 percent last year.

ADR growth was due mainly to a combination of price increases and a shift in customer mix toward higher profit generating guests, the company said.

Hotel operating margin for the quarter grew about 90 basis points to 51 percent.

Results were also helped by interest costs that decreased 22.4 percent from last year to $76.6 million, and income tax benefit increased to $8 million from $2.2 million.

For fiscal year 2014, the company expects revenue to grow 7 percent to 10 percent to $1.212 billion to $1.246 billion. Analysts currently expect revenue of $1.24 billion.

Capital expense for the year is estimated between $150 and $170 million.

Extended Stay went public on Nov. 13 after selling 28.25 million shares at $20 each. The company is owned by Blackstone Group LP (BX), Centerbridge Partners LP and Paulson & Co. Its going public came three years after its owners resuscitated it from bankruptcy and has since invested in renovations.

The company's stock is trading at $25.30, down $1.15 or 4.35%, on a volume of 700 thousand shares.