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Choice Hotels (CHH) Stock Declines 28% YTD: Is the Worst Over?
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Shares of Choice Hotels International, Inc. (CHH - Free Report) have declined 27.5% in the past six months compared with the industry’s decrease of 13.8%. The decline can be primarily attributed to the coronavirus pandemic.
Although the company’s shares have declined in the past six months, the stock is likely to take a U-turn due to improvements in RevPAR, expansion strategies, enhancement of the mid-scale brand and transformation and advancement of the Comfort brands. This Zacks Rank #2 (Buy) company has an impressive long-term earnings growth rate of 12.9%. Let’s delve deeper.
Growth Drivers
Choice Hotels relies heavily on expansion in both domestic and international markets. In second-quarter 2022, the company awarded 122 domestic franchise agreements (representing 10,787 rooms) compared with 111 franchising agreements reported in the prior-year quarter. The company reported sequential increases in its business and group travel demand, driven by a rise in extended vacations, household relocations and temporary remote work assignments. The transition of leisure travel into mainstream business added to the positives. Backed by the positive trends and segment-specific tailwinds, the company stated that RevPAR and adjusted EBITDA surpassed the 2019 levels. The company anticipates the momentum to continue on the back of investments in infrastructure build and onshoring of the U.S. supply chain.
Coming to the extended-stay portfolio, the company witnessed rapid expansion, reaching 489 domestic hotels as of Jun 30, 2022. This highlighted an increase of 6.3% on a year-over-year basis. During the second quarter of 2022, the company awarded 41 extended-stay domestic franchise agreements, reflecting growth of 24% and 78%, respectively, from the 2021 and 2019 levels. Along with domestic growth, the company continues to expand its international footprint in new countries. Key international operating markets include Spain, Colombia, the Caribbean and Canada. Relatively new to the midscale portfolio, Clarion Pointe — part of the popular Clarion brand — is experiencing great success. The Clarion Point brand resonates well with guests. The brand has 50 hotels open in the United States and 10 additional hotels awaiting conversion this year.
Image Source: Zacks Investment Research
Choice Hotels’ Cambria portfolio has been doing solid business. Cambria has significantly outperformed the upscale soft brands (as well as the segment on a whole) in terms of year-over-year RevPAR change. The brand has been well received on account of smart-conversion opportunities. During the second quarter of 2022, the company broke ground for 21 Cambria projects, thereby bringing the total unit count to 60. Also, it stated that it has an additional 65 domestic properties in the pipeline. Backed by solid consumer confidence and the attractiveness of Choice Hotels’ value proposition, the company anticipates boosting the revenue intensity of its system by adding more properties. In 2022, the company expects to open 10 additional Cambria hotels.
Moreover, on Jun 12, 2022, the company entered into a definitive agreement to acquire Radisson Hospitality for approximately $675 million. The transaction includes the integration of over 67,000 Radisson Hotels Americas rooms into the company’s portfolio, thereby paving a path for 12% growth in global rooms number. Moreover, the initiative allows the company to expand its presence in the Canadian, Mexican, Caribbean and other key Americas markets. Given the growth prospects with respect to the penetration in the upscale market and value creation efforts, the company remains optimistic in this regard.
Marriott Vacations currently sports a Zacks Rank #1 (Strong Buy). VAC has a trailing four-quarter earnings surprise of 13.9%, on average. The stock has declined 8.2% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for VAC’s current financial year sales and EPS indicates an increase of 19.7% and 131.4%, respectively, from the year-ago period’s reported levels.
Marriott carries a Zacks Rank #2, at present. MAR has a trailing four-quarter earnings surprise of 18.6%, on average. The stock has increased 13.9% in the past year.
The Zacks Consensus Estimate for MAR’s current financial year sales and EPS indicates growth of 46.7% and 102.8%, respectively, from the year-ago period’s reported levels.
Hyatt Hotels currently carries a Zacks Rank #2. H has a trailing four-quarter earnings surprise of 11.2%, on average. The stock has gained 26.2% in the past year.
The Zacks Consensus Estimate for H’s current financial year sales and EPS indicates growth of 21.9% and 21.7%, respectively, from the year-ago period’s reported levels.
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Choice Hotels (CHH) Stock Declines 28% YTD: Is the Worst Over?
Shares of Choice Hotels International, Inc. (CHH - Free Report) have declined 27.5% in the past six months compared with the industry’s decrease of 13.8%. The decline can be primarily attributed to the coronavirus pandemic.
Although the company’s shares have declined in the past six months, the stock is likely to take a U-turn due to improvements in RevPAR, expansion strategies, enhancement of the mid-scale brand and transformation and advancement of the Comfort brands. This Zacks Rank #2 (Buy) company has an impressive long-term earnings growth rate of 12.9%. Let’s delve deeper.
Growth Drivers
Choice Hotels relies heavily on expansion in both domestic and international markets. In second-quarter 2022, the company awarded 122 domestic franchise agreements (representing 10,787 rooms) compared with 111 franchising agreements reported in the prior-year quarter. The company reported sequential increases in its business and group travel demand, driven by a rise in extended vacations, household relocations and temporary remote work assignments. The transition of leisure travel into mainstream business added to the positives. Backed by the positive trends and segment-specific tailwinds, the company stated that RevPAR and adjusted EBITDA surpassed the 2019 levels. The company anticipates the momentum to continue on the back of investments in infrastructure build and onshoring of the U.S. supply chain.
Coming to the extended-stay portfolio, the company witnessed rapid expansion, reaching 489 domestic hotels as of Jun 30, 2022. This highlighted an increase of 6.3% on a year-over-year basis. During the second quarter of 2022, the company awarded 41 extended-stay domestic franchise agreements, reflecting growth of 24% and 78%, respectively, from the 2021 and 2019 levels. Along with domestic growth, the company continues to expand its international footprint in new countries. Key international operating markets include Spain, Colombia, the Caribbean and Canada. Relatively new to the midscale portfolio, Clarion Pointe — part of the popular Clarion brand — is experiencing great success. The Clarion Point brand resonates well with guests. The brand has 50 hotels open in the United States and 10 additional hotels awaiting conversion this year.
Image Source: Zacks Investment Research
Choice Hotels’ Cambria portfolio has been doing solid business. Cambria has significantly outperformed the upscale soft brands (as well as the segment on a whole) in terms of year-over-year RevPAR change. The brand has been well received on account of smart-conversion opportunities. During the second quarter of 2022, the company broke ground for 21 Cambria projects, thereby bringing the total unit count to 60. Also, it stated that it has an additional 65 domestic properties in the pipeline. Backed by solid consumer confidence and the attractiveness of Choice Hotels’ value proposition, the company anticipates boosting the revenue intensity of its system by adding more properties. In 2022, the company expects to open 10 additional Cambria hotels.
Moreover, on Jun 12, 2022, the company entered into a definitive agreement to acquire Radisson Hospitality for approximately $675 million. The transaction includes the integration of over 67,000 Radisson Hotels Americas rooms into the company’s portfolio, thereby paving a path for 12% growth in global rooms number. Moreover, the initiative allows the company to expand its presence in the Canadian, Mexican, Caribbean and other key Americas markets. Given the growth prospects with respect to the penetration in the upscale market and value creation efforts, the company remains optimistic in this regard.
Other Key Picks
Some other top-ranked stocks in the Zacks Consumer Discretionary sector are Marriott Vacations Worldwide Corporation (VAC - Free Report) , Marriott International, Inc. (MAR - Free Report) and Hyatt Hotels Corporation (H - Free Report) .
Marriott Vacations currently sports a Zacks Rank #1 (Strong Buy). VAC has a trailing four-quarter earnings surprise of 13.9%, on average. The stock has declined 8.2% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for VAC’s current financial year sales and EPS indicates an increase of 19.7% and 131.4%, respectively, from the year-ago period’s reported levels.
Marriott carries a Zacks Rank #2, at present. MAR has a trailing four-quarter earnings surprise of 18.6%, on average. The stock has increased 13.9% in the past year.
The Zacks Consensus Estimate for MAR’s current financial year sales and EPS indicates growth of 46.7% and 102.8%, respectively, from the year-ago period’s reported levels.
Hyatt Hotels currently carries a Zacks Rank #2. H has a trailing four-quarter earnings surprise of 11.2%, on average. The stock has gained 26.2% in the past year.
The Zacks Consensus Estimate for H’s current financial year sales and EPS indicates growth of 21.9% and 21.7%, respectively, from the year-ago period’s reported levels.