Yahoo Finance Choice Hotels (CHH) Up 1.5% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Choice Hotels (CHH). Shares have added about 1.5% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Choice Hotels due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Choice Hotels Q3 Earnings Miss, Revenues Beat Estimates
Choice Hotels reported third-quarter 2022 results, with earnings missing the Zacks Consensus Estimate but revenues beating the same. The top and bottom lines increased on a year-over-year basis.
Q3 Earnings and Revenues
Choice Hotels reported adjusted earnings of $1.56 per share, which missed the consensus mark of $1.75 by 10.9%. The bottom line increased 3.3% from the prior-year quarter’s figure of $1.51.
In the quarter under review, total revenues came in at $414.3 million, which surpassed the consensus mark of $380 million by 8.9%. Moreover, the metric rose 28% from the year-ago quarter’s level.
Franchising & Royalties
During the third quarter, domestic royalty fees totaled $144 million, up 13% compared with the same period in 2021. Domestic revenues per available room (RevPAR) increased 15.2% from third-quarter 2019. The uptick was driven by a 15.1% increase in the average daily rate.
In the third quarter, domestic franchise agreements awarded increased by 38%. The company's extended-stay portfolio continues to expand its footprint. As of Sep 30, 2022, the number of domestic pipelines increased 16% to 1,017 hotels.
Operating Results
Total operating expenses during third-quarter 2022 increased 72% year over year to $282.6 million. Adjusted EBITDA rose 4.6% from the prior-year quarter’s figure to $139.4 million.
Balance Sheet
As of Sep 30, 2022, Choice Hotels had cash and cash equivalents of $52.5 million compared with $511.6 million as of Dec 31, 2021.
Long-term debt at the end of the third quarter was $1,155.1 million compared with $844.1 million reported in fourth-quarter 2021 end. Goodwill, as a percentage of total assets, came in at 10.4% compared with 8.1% in first-quarter 2022 end.
2022 Outlook
In 2022, the company expects adjusted EBITDA in the range of $465-$470 million (including a $14-$15 million adjusted EBITDA contribution from the Radisson Hotels Americas business unit), representing 15-17% growth compared with 2021.
Excluding the impact of Radisson Hotels Americas, domestic RevPAR is likely to grow in the range of 13-15% compared with 2019 and 11-12% compared with 2021.
In 2022, the company’s domestic effective royalty rate (excluding the impact of Radisson Hotels Americas) for full-year 2022 is anticipated to increase in the mid-single digit.
Other Updates
The domestic extended-stay pipeline reached 468 hotels as of Sep 30, 2022. At the end of third-quarter 2022, the number of domestic hotels and rooms increased 5.4% and 5.5%, respectively, from September 30, 2021.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision flatlined during the past month.
The consensus estimate has shifted -11.4% due to these changes.
VGM Scores
At this time, Choice Hotels has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Choice Hotels has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Choice Hotels belongs to the Zacks Hotels and Motels industry. Another stock from the same industry, Hilton Worldwide Holdings Inc. (HLT), has gained 5.2% over the past month. More than a month has passed since the company reported results for the quarter ended September 2022.
Hilton Worldwide Holdings Inc. reported revenues of $2.37 billion in the last reported quarter, representing a year-over-year change of +35.4%. EPS of $1.31 for the same period compares with $0.78 a year ago.
For the current quarter, Hilton Worldwide Holdings Inc. is expected to post earnings of $1.20 per share, indicating a change of +66.7% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.2% over the last 30 days.
Hilton Worldwide Holdings Inc. has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Choice Hotels International, Inc. (CHH) : Free Stock Analysis Report
Hilton Worldwide Holdings Inc. (HLT) : Free Stock Analysis Report
