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Choice Hotels (CHH) Q2 Earnings Miss, Revenues Top Estimates

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Choice Hotels International, Inc. (CHH - Free Report) reported second-quarter 2020 results, wherein earnings missed the Zacks Consensus Estimate but revenues beat the same. Meanwhile, earnings and revenues declined from the year-ago level due to the coronavirus pandemic.

Nonetheless, Patrick Pacious — president and chief executive officer of Choice Hotels — said, "We believe that our predominantly leisure focus and strength in domestic drive-to markets will allow us to continue to outperform the overall industry during the recovery phase. We are optimistic that our long-term view, strong balance sheet, disciplined capital allocation strategy, proven brands and compelling franchisee value proposition will help us emerge from the crisis in a position of strength."

The lodging franchisor reported adjusted earnings of 13 cents per share, which missed the consensus mark of 28 cents by 53.6%. Also, the bottom line dropped 89% from the prior-year number.

For the quarter under review, total revenues came in at $151.7 million, down 52% year over year. Nonetheless, the figure topped the consensus mark of $149 million by 1.6%.

The coronavirus pandemic has been hurting demand and occupancy. Owing to the unprecedented nature of the crisis, the company has withdrawn its 2020 guidance. That said, it expects the impact of COVID-19 on business performance to be less significant in the third quarter than the second quarter due to continued weekly trend of travel demand growth, predominantly stemming from leisure transient guests driving to their destinations.

Franchising & Royalties

Domestic royalty fees totaled $48.3 million, down 52% year over year. Also, domestic system-wide RevPAR declined 49.6% year over year. Average daily rate was down 19.9% and occupancy was down to 39.1% from 62.1% in the prior-year quarter.

The company’s newly-executed domestic franchise agreements were 93 in the second quarter, down 49% year over year. As of Jun 30, 2020, the number of domestic hotels and rooms rose 0.6% and 2% year over year, respectively.

Operating Results

Total operating expenses decreased 32% from second-quarter 2019 to $142.6 million. Adjusted EBITDA declined 60% from the prior-year quarter to $41.1 million.

Balance Sheet

As of Jun 30, 2020, Choice Hotels had cash and cash equivalents of $314.1 million compared with $33.8 million on Dec 31, 2019.

Long-term debt at second quarter-end was $1,232.1 million, up from $844.1 million at 2019-end. Goodwill, as a percentage of total assets, was 9.4% at second quarter-end compared with 67.3% at 2019-end.

Meanwhile, it suspended the payout of future dividends for the remainder of 2020. As a result, total dividends paid for 2020 will be approximately $25 million.

Management repurchased roughly 7,000 shares for nearly $0.5 million under the share repurchase program during the second quarter. As of Jun 30, 2020, the company had 3.4 million shares remaining under the current share repurchase authorization.

Zacks Rank & Peer Releases

Choice Hotels, which shares space with Marriott Vacations Worldwide (VAC - Free Report) in the Zacks Hotels and Motels industry, currently has a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Hilton Worldwide Holdings Inc. (HLT - Free Report) reported dismal second-quarter 2020 results, wherein earnings and revenues not only missed the Zacks Consensus Estimate but also declined sharply on a year-over-year basis.

Hyatt Hotels Corporation (H - Free Report) reported dismal second-quarter 2020 results, wherein earnings and revenues not only missed the Zacks Consensus Estimate but also declined sharply on a year-over-year basis.

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