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Choice Hotels (CHH) Down 3% Since Last Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for Choice Hotels (CHH - Free Report) . Shares have lost about 3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Choice Hotels due for a breakout? 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 catalysts.
Choice Hotels reported fourth-quarter 2021 results, wherein earnings and revenues surpassed the Zacks Consensus Estimate. The top and bottom lines improved on a year-over-year basis. Earnings beat the Zacks Consensus Estimate for the third straight quarter.
Q4 Earnings and Revenues
Choice Hotels reported adjusted earnings of 99 cents per share, which beat the consensus mark of 81 cents by 22.2%. The bottom line surged 98% from the prior-year quarter’s figure of 50 cents.
In the quarter under review, total revenues were $284.6 million, which outpaced the consensus mark of $281 million by 1.5%. The metric rose 47.2% from the year-ago quarter’s levels.
Franchising & Royalties
During the fourth quarter, domestic royalty fees totaled $93.6 million, up 14% from the 2019 comparable period. Domestic system-wide revenue per available room (RevPAR) increased 13.9% from third-quarter 2019 levels. The uptick was driven by a 9.5% growth in average daily rate (ADR) and a 210 basis-point increase in occupancy levels.
In 2021, the company awarded 528 domestic franchise agreements, up 24% year over year. For 2021, the company's domestic franchise agreements for conversion and new construction hotels rose by 17% and 39%, respectively, compared with the same period of 2020.
As of Dec 31, 2021, the number of domestic hotels and rooms declined 0.8% and 1.2% year over year, respectively.
Operating Results
Total operating expenses during fourth-quarter 2021 increased 5.8% year over year to $177.6 million. Adjusted EBITDA rose 76.1% from the prior-year quarter’s figure to $95.2 million.
Balance Sheet
As of Dec 31, 2021, Choice Hotels had cash and cash equivalents of $511.6 million compared with $234.8 million on Dec 31, 2020.
Long-term debt at the end of the fourth quarter was $844.1 million compared with $843.8 million reported in third-quarter 2021-end. Goodwill, as a percentage of total assets, came in at 8.2% compared with 8.5% at third-quarter 2021-end.
For 2021, the company paid out a cash dividend of $25 million. During fourth-quarter 2021, the company declared an increase of 6% to the annual dividend rate to $0.2375 per common share.
2022 Outlook
For 2022, the company expects to witness adjusted EBITDA and RevPAR growth, compared to 2021. The company's domestic effective royalty rate is likely to rise in the mid-single digits for full-year 2022, compared to full-year 2021.
Other Updates
The number of domestic hotels in the upscale segment rose 13% year over year, owing to increase in unit count for both the Cambria Hotels brand and Ascend Hotel Collection.
Coming to the extended-stay portfolio, the company witnessed rapid expansion, thereby reaching 474 domestic hotels as of Dec 31, 2021. This highlighted an increase of 6% on a year-over-year basis. The domestic extended-stay pipeline comprised 340 hotels awaiting conversion, under construction or approval for development.
As of Dec 31, 2021, the company’s total domestic pipeline of hotels awaiting conversion, under construction or approved for development reached 880 hotels, thereby reflecting nearly 75,000 rooms.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
VGM Scores
Currently, Choice Hotels has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, 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
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Choice Hotels has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Choice Hotels (CHH) Down 3% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Choice Hotels (CHH - Free Report) . Shares have lost about 3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Choice Hotels due for a breakout? 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 catalysts.
Choice Hotels Q4 Earnings & Revenues Beat Estimates
Choice Hotels reported fourth-quarter 2021 results, wherein earnings and revenues surpassed the Zacks Consensus Estimate. The top and bottom lines improved on a year-over-year basis. Earnings beat the Zacks Consensus Estimate for the third straight quarter.
Q4 Earnings and Revenues
Choice Hotels reported adjusted earnings of 99 cents per share, which beat the consensus mark of 81 cents by 22.2%. The bottom line surged 98% from the prior-year quarter’s figure of 50 cents.
In the quarter under review, total revenues were $284.6 million, which outpaced the consensus mark of $281 million by 1.5%. The metric rose 47.2% from the year-ago quarter’s levels.
Franchising & Royalties
During the fourth quarter, domestic royalty fees totaled $93.6 million, up 14% from the 2019 comparable period. Domestic system-wide revenue per available room (RevPAR) increased 13.9% from third-quarter 2019 levels. The uptick was driven by a 9.5% growth in average daily rate (ADR) and a 210 basis-point increase in occupancy levels.
In 2021, the company awarded 528 domestic franchise agreements, up 24% year over year. For 2021, the company's domestic franchise agreements for conversion and new construction hotels rose by 17% and 39%, respectively, compared with the same period of 2020.
As of Dec 31, 2021, the number of domestic hotels and rooms declined 0.8% and 1.2% year over year, respectively.
Operating Results
Total operating expenses during fourth-quarter 2021 increased 5.8% year over year to $177.6 million. Adjusted EBITDA rose 76.1% from the prior-year quarter’s figure to $95.2 million.
Balance Sheet
As of Dec 31, 2021, Choice Hotels had cash and cash equivalents of $511.6 million compared with $234.8 million on Dec 31, 2020.
Long-term debt at the end of the fourth quarter was $844.1 million compared with $843.8 million reported in third-quarter 2021-end. Goodwill, as a percentage of total assets, came in at 8.2% compared with 8.5% at third-quarter 2021-end.
For 2021, the company paid out a cash dividend of $25 million. During fourth-quarter 2021, the company declared an increase of 6% to the annual dividend rate to $0.2375 per common share.
2022 Outlook
For 2022, the company expects to witness adjusted EBITDA and RevPAR growth, compared to 2021. The company's domestic effective royalty rate is likely to rise in the mid-single digits for full-year 2022, compared to full-year 2021.
Other Updates
The number of domestic hotels in the upscale segment rose 13% year over year, owing to increase in unit count for both the Cambria Hotels brand and Ascend Hotel Collection.
Coming to the extended-stay portfolio, the company witnessed rapid expansion, thereby reaching 474 domestic hotels as of Dec 31, 2021. This highlighted an increase of 6% on a year-over-year basis. The domestic extended-stay pipeline comprised 340 hotels awaiting conversion, under construction or approval for development.
As of Dec 31, 2021, the company’s total domestic pipeline of hotels awaiting conversion, under construction or approved for development reached 880 hotels, thereby reflecting nearly 75,000 rooms.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
VGM Scores
Currently, Choice Hotels has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, 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
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Choice Hotels has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.