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Why La Quinta Holdings Inc.'s Shares Jumped 17% Today

By Travis Hoium - Apr 28, 2016 at 12:00AM

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First-quarter earnings weren't great, but there could be growth ahead.

Image source: La Quinta Holdings.

What: Shares of hotel chain La Quinta Holdings Inc. (NYSE: LQ) jumped as much as 17% on Thursday after the company announced first-quarter earnings.

So what: Revenue in the quarter fell 2.6% to $241.8 million but the company swung to a loss of $38.8 million from making a $6.1 million profit a year ago. On an adjusted basis, which pulls out one-time items, earnings were $0.09 per share, a penny ahead of expectations. 

For the full year, management still expects revenue per available room (RevPAR) to rise 1%-3% and adjusted EBITDA of $367 million to $384 million.

Now what: Rather than a huge earnings beat, this is more of a relief that operating conditions weren't even worse. The pullback in oil prices has hurt La Quinta because of its exposure to areas in Texas where oil drives traffic. But the fact that management still expects a small amount of RevPAR growth for the year and is confident in its EBITDA prediction could be a sign that the worst is behind us. Investors should watch operations for the remainder of the year to see if indeed growth is on the horizon, but it looks like this could be a trough in earnings for this hotel company.

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