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Choice Hotels' (CHH) Q3 Earnings Top Estimates, Revenues Miss

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Choice Hotels International, Inc. (CHH - Free Report) reported third-quarter 2021 results, with earnings surpassing the Zacks Consensus Estimate and revenues missing the same. The top and the bottom line increased on a year-over-year basis. Following the results, shares of the company moved up 1.5% during trading hours on Nov 4.

Patrick Pacious, president and chief executive officer, Choice Hotels, stated, "Our impressive thirdquarter results are a testament to the success of our long-term growth strategy and the investments we have made to position us to further increase our share of travel demand and benefit from trends that favor leisure travel, limited-service hotels and longer stay occasions."

Q3 Earnings and Revenues

Choice Hotels reported adjusted earnings of $1.51 per share, which beat the consensus mark of $1.32 cents by 14.4%. The bottom line increased 128.8% from the prior-year quarter’s figure of 66 cents.

Choice Hotels International, Inc. Price, Consensus and EPS Surprise

 

Choice Hotels International, Inc. Price, Consensus and EPS Surprise

Choice Hotels International, Inc. price-consensus-eps-surprise-chart | Choice Hotels International, Inc. Quote

 

In the quarter under review, total revenues came in at $323.4 million, which missed the consensus mark of $357 million by 9.5%. However, the metric rose 53.4% from the year-ago quarter’s levels.

Franchising & Royalties

During the third quarter, Domestic royalty fees totaled $123 million, up 14% from 2019 levels. Domestic system-wide revenue per available room (RevPAR) increased 11.4% from third-quarter 2019 levels.  The uptick was driven by 8.8% growth in average daily rate (ADR) and a 150 basis-point increase in occupancy levels.

Year-to-date (through Sep 30, 2021), the company’s domestic franchise agreements were 289, up 25% year over year. More than 25% of the agreements comprised conversion hotels.
 
As of Sep 30, 2021, the number of domestic hotels and rooms inched up 0.1% and 1.2% year over year, respectively.

Operating Results

Total operating expenses during third-quarter 2021 increased 5.4% year over year to $164.3 million. Adjusted EBITDA rose 78.8% from the prior-year quarter’s figure to $133.2 million.

Balance Sheet

As of Sep 30, 2021, Choice Hotels had cash and cash equivalents of $415.1 million compared with $308 million on Jun 30, 2021.

Long-term debt at the end of the third quarter was $843.8 million compared with $1,059.6 million reported in second-quarter 2021-end. Goodwill, as a percentage of total assets, came in at 8.5% compared with 9.2% at second-quarter 2021-end.

For the nine months ended Sep 30, 2021, the company paid out a cash dividend of $12.5 million on a quarterly dividend rate of 22.5 cents per share. For 2021, the company expects to pay dividends worth nearly $25 million.

2021 Outlook

For 2021, the company expects Adjusted EBITDA to exceed 2019 levels and range between $382 million and $387 million. It expects 2021 domestic RevPAR to surpass 2019 levels with growth of approximately 1%.

Other Updates

During the third quarter, the company's domestic upscale, midscale, and extended stay segments reported an increase of 2% and 2.6% in units and rooms, respectively, on a year-over-year basis.

The number of domestic hotels in the upscale segment rose 22% year over year, owing to an increase in room count of 6% for the Cambria Hotels brand and 27% for the Ascend Hotel Collection. In September 2021, the company launched a new Cambria hotel prototype to boost growth in the secondary and leisure markets.

Coming to the extended-stay portfolio, the company witnessed rapid expansion, thereby reaching 467 domestic hotels as of Sep 30, 2021. This highlighted an increase of 11% on a year-over-year basis. The domestic extended-stay pipeline comprised 310 hotels awaiting conversion, under construction or approval for development.

As of Sep 30, 2021, the company’s total domestic pipeline of hotels awaiting conversion, under construction or approved for development reached 860 hotels, thereby reflecting nearly 71,000 rooms.

Zacks Rank & Key Picks

Choice Hotels currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the Zacks Consumer Discretionary sector include Golden Entertainment, Inc. (GDEN - Free Report) , Camping World Holdings, Inc. (CWH - Free Report) and RCI Hospitality Holdings, Inc. (RICK - Free Report) . Golden Entertainment sports a Zacks rank #1, while Camping World and RCI Hospitality carry a Zacks Rank #2 (Buy).

Golden Entertainment’s 2021 earnings are expected to surge 232.1%.

Camping World has a trailing four-quarter earnings surprise of 70.9%, on average.

RCI Hospitality has three-five-year EPS growth rate of 12%.