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Choice Hotels (CHH) a Strong Buy on Earnings Expectation - Analyst Blog

Zacks Equity Research
Updated

On Jan 17, Zacks Investment Research upgraded Choice Hotels International Inc. (CHH) to a Zacks Rank #1 (Strong Buy) backed by the company’s solid past performance, which makes us optimistic of its upcoming results to be reported in the second or third week of February and increased capital deployment.

Why the Upgrade?

We are positive about the prospects of Choice Hotels as the hotel industry gains steam. Both transient and group demand exhibited solid momentum in 2014 reflecting that the industry has managed to tide over the extended slump witnessed in the post-recession period.

We believe that Choice Hotels is poised to benefit from the positive near-term outlook of the sector. Occupancy rates and RevPAR of the company’s properties have constantly risen over the past year, which reflects the increased leisure travel due to the improving U.S. economy, as well as management’s initiatives to make its business more profitable. In fact, Choice Hotels has not missed the Zacks Consensus Estimate for earnings in the past 6 quarters, while it beat the consensus mark for revenues in the past 4 out of 6 quarters.  

Further, Choice Hotels’ capital deployment program improved investors’ sentiment regarding the stock. On Dec 17, 2014, the company’s board of directors announced a 5% increase in the quarterly dividend from 18.5 cents to 19.5 cents per share. Additionally, the board increased its current share repurchase program to 3 million shares.

Such optimism for the core hotel lodging business, the recent performance by Choice Hotels and the buoyant outlook for the reminder of the year, prompted our upgrade.

Other Stocks to Consider

Some companies in the hotel industry that are attractive at current levels include La Quinta Holdings Inc. (LQ), Intercontinental Hotels Group plc (IHG) and Marriott Vacations Worldwide Corp. (VAC). All these stocks carry a Zacks Rank #2 (Buy).


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INTERCONTL HTLS (IHG): Free Stock Analysis Report
 
CHOICE HTL INTL (CHH): Free Stock Analysis Report
 
MARRIOT VAC WW (VAC): Free Stock Analysis Report
 
LA QUINTA HLDGS (LQ): Free Stock Analysis Report
 
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Zacks Investment Research