Why Shares of Home Inns & Hotels Management Inc. Got Dumped

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What: Shares of Home Inns & Hotels Management  (NASDAQ: HMIN  ) fell as much as 13%, and finished down 11% today after reporting fourth-quarter earnings last night.

So what: The Chinese motel-operator said revenue grew 9.8%, to $265.9 million, and earnings came in at 1.91 RMB versus estimates at 1.99 RMB. CEO David Sun acknowledged "the weak market environment" and "near term challenges in the macro environment," but said, "We continue to believe in the long-term growth prospects of China's travel and lodging industry." Sun also noted that Home Inns revenue growth has slowed due to a transition from a leasing and operating model to a franchise model, which should be a path to sustained profits.

Now what: Home Inns continues to expand at a rapid pace, adding 139 in the quarter, bringing the total to 2,180, and has 417 more hotel projects in the pipeline. As China's middle class gorws, the demand for budget lodging should increase along with it, and Home Inns' franchise, like that of American motel companies, seems poised to benefit from this organic growth. Revenue guidance, however, was a bit weak, as the company expects 7% to 10.2% increase in the top line, below estimates of 12.6%.

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Jeremy Bowman

Fool since 2011. I write about consumer goods, the big picture, and whatever else piques my interest. Follow me on Twitter to see my latest articles, and for commentary on hot topics in retail and the broad market.

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Related Tickers

9/4/2015 10:29 AM
HMIN $25.06 Up +0.02 +0.08%
Home Inns & Hotels… CAPS Rating: **