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Choice Hotels (CHH) Up 15.6% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Choice Hotels (CHH - Free Report) . Shares have added about 15.6% in that time frame, outperforming 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 catalysts.
Choice Hotels Q3 Earnings Miss, Revenues Top Estimates
Choice Hotels reported third-quarter 2020 results, wherein earnings missed the Zacks Consensus Estimate while revenues beat the same. However, the top and the bottom line declined year over year owing to the COVID-19 pandemic.
Nonetheless, Patrick Pacious, president and chief executive officer of Choice Hotels, stated, "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."
Q3 Earnings and Revenues
The lodging franchisor reported adjusted earnings of 66 cents per share, which missed the consensus mark of 72 cents by 8.3%. Also, the bottom line dropped 51.8% from the prior-year figure of $1.37.
For the quarter under review, total revenues came in at $210.8 million, down 32.2% year over year. Nonetheless, the figure topped the consensus mark of $201 million by 4.9%.
Franchising & Royalties
During the third quarter, Domestic royalty fees totaled $76 million, down 29% year over year. Also, domestic system-wide RevPAR declined 28.8% year over year. Average daily rate was down 13.4% and occupancy was down to 52.1% from 63.4% in the prior-year quarter.
The company’s new domestic franchise agreements were 232 in the third quarter, down 38% year over year. Year to date through Sep 30, 2020, 70% of the agreements comprised conversion hotels.
As of Sep 30, 2020, the number of domestic hotels and rooms rose 0.7% and 1.9% year over year, respectively. Meanwhile, the number of international hotels and rooms grew 0.9% and 10.7%, year over year, respectively.
Operating Results
Total operating expenses decreased 25.4% from third-quarter 2019 to $155.4 million. Adjusted EBITDA declined 33.7% from the prior-year quarter to $74.9 million.
Balance Sheet
As of Sep 30, 2020, Choice Hotels had cash and cash equivalents of $192 million compared with $33.8 million on Dec 31, 2019.
Long-term debt at the end of the third quarter was $1,058.3 million, up from $844.1 million at 2019-end. During the third quarter, goodwill as a percentage of total assets came in at 10.1%, compared with 11.5% 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 8,000 shares for nearly $0.7 million under the share repurchase program during the third quarter. As of Sep 30, 2020, the company had 3.4 million shares remaining under the current share repurchase authorization.
Other Updates
As of Sep 30, 2020, the company’s total domestic pipeline of hotels awaiting conversion, under construction, or approved for development, reached 945 hotels, thereby representing more than 76,000 rooms.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 28.44% due to these changes.
VGM Scores
Currently, Choice Hotels has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Choice Hotels has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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Choice Hotels (CHH) Up 15.6% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Choice Hotels (CHH - Free Report) . Shares have added about 15.6% in that time frame, outperforming 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 catalysts.
Choice Hotels Q3 Earnings Miss, Revenues Top Estimates
Choice Hotels reported third-quarter 2020 results, wherein earnings missed the Zacks Consensus Estimate while revenues beat the same. However, the top and the bottom line declined year over year owing to the COVID-19 pandemic.
Nonetheless, Patrick Pacious, president and chief executive officer of Choice Hotels, stated, "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."
Q3 Earnings and Revenues
The lodging franchisor reported adjusted earnings of 66 cents per share, which missed the consensus mark of 72 cents by 8.3%. Also, the bottom line dropped 51.8% from the prior-year figure of $1.37.
For the quarter under review, total revenues came in at $210.8 million, down 32.2% year over year. Nonetheless, the figure topped the consensus mark of $201 million by 4.9%.
Franchising & Royalties
During the third quarter, Domestic royalty fees totaled $76 million, down 29% year over year. Also, domestic system-wide RevPAR declined 28.8% year over year. Average daily rate was down 13.4% and occupancy was down to 52.1% from 63.4% in the prior-year quarter.
The company’s new domestic franchise agreements were 232 in the third quarter, down 38% year over year. Year to date through Sep 30, 2020, 70% of the agreements comprised conversion hotels.
As of Sep 30, 2020, the number of domestic hotels and rooms rose 0.7% and 1.9% year over year, respectively. Meanwhile, the number of international hotels and rooms grew 0.9% and 10.7%, year over year, respectively.
Operating Results
Total operating expenses decreased 25.4% from third-quarter 2019 to $155.4 million. Adjusted EBITDA declined 33.7% from the prior-year quarter to $74.9 million.
Balance Sheet
As of Sep 30, 2020, Choice Hotels had cash and cash equivalents of $192 million compared with $33.8 million on Dec 31, 2019.
Long-term debt at the end of the third quarter was $1,058.3 million, up from $844.1 million at 2019-end. During the third quarter, goodwill as a percentage of total assets came in at 10.1%, compared with 11.5% 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 8,000 shares for nearly $0.7 million under the share repurchase program during the third quarter. As of Sep 30, 2020, the company had 3.4 million shares remaining under the current share repurchase authorization.
Other Updates
As of Sep 30, 2020, the company’s total domestic pipeline of hotels awaiting conversion, under construction, or approved for development, reached 945 hotels, thereby representing more than 76,000 rooms.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 28.44% due to these changes.
VGM Scores
Currently, Choice Hotels has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Choice Hotels has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.