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Choice Hotels (CHH) Q1 Earnings Beat, Revenues Lag Estimates

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Choice Hotels International, Inc. (CHH - Free Report) reported first-quarter 2022 results, wherein earnings surpassed the Zacks Consensus Estimate, but revenues missed the same. The top and bottom lines, however, increased on a year-over-year basis. Earnings beat the Zacks Consensus Estimate for the fourth straight quarter. Following the results, the company’s shares appreciated 4% on May 10.

Patrick Pacious, president and CEO of Choice Hotels, stated, “We are confident that our long-term investments, compelling franchisee value proposition, and strong financial health, combined with underlying consumer trends that favor leisure travel, limited-service hotels and longer stay occasions, will allow us to drive sustainable growth in 2022 and beyond.”

Q1 Earnings and Revenues

Choice Hotels reported adjusted earnings of $1.03 per share, which beat the consensus mark of 93 cents by 10.8%. The bottom line improved 81% from the prior-year quarter’s figure of 50 cents.

In the quarter under review, total revenues were $257.7 million, which marginally missed the consensus mark of $258 million by 0.2%. However, the metric rose 41% from the year-ago quarter’s levels.

Franchising & Royalties

During the first quarter, domestic royalty fees totaled $87 million, up 38% compared with the same period of 2021. Domestic system-wide revenue per available room (RevPAR) increased 10.4% from the first-quarter 2019 levels. The uptick was driven by a 9.3% growth in average daily rate (ADR) and a 60 basis-point increase in occupancy levels.

In the first quarter, the company awarded 93 domestic franchise agreements, up 4% year over year. The company's extended-stay portfolio continues to expand its presence.

As of Mar 31, 2022, the number of domestic hotels and rooms declined 1.2% and 2.8% year over year, respectively.

Operating Results

Total operating expenses during first-quarter 2022 increased 14% year over year to $158.4 million. Adjusted EBITDA rose 53.2% from the prior-year quarter’s figure to $96.6 million.

Balance Sheet

As of Mar 31, 2022, Choice Hotels had cash and cash equivalents of $527.2 million compared with $511.6 million on Dec 31, 2021.

Long-term debt at the end of the first quarter was $844.4 million compared with $844.1 million reported in the fourth-quarter 2021-end. Goodwill, as a percentage of total assets, came in at 8.1% compared with 8.2% at the fourth-quarter 2021-end.

2022 Outlook

For 2022, the company expects to witness adjusted EBITDA and RevPAR growth compared to 2021. In 2022, the company expects RevPAR to increase in the range of 10% and 13% as compared to the full-year 2019.

Other Updates

Coming to the extended-stay portfolio, the company witnessed rapid expansion, thereby reaching 478 domestic hotels as of Mar 31, 2022. This highlighted an increase of 5.3% on a year-over-year basis. The domestic extended-stay pipeline comprised 350 hotels awaiting conversion, under construction or approved for development.

As of Mar 31, 2022, the company’s total domestic pipeline of hotels awaiting conversion, under construction or approved for development, reached 864 hotels, thereby reflecting nearly 78,000 rooms.

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

Stocks to Consider

Some better-ranked stocks in the Consumer Discretionary sector are Civeo Corporation (CVEO - Free Report) , Bluegreen Vacations Holding Corporation (BVH - Free Report) and Funko, Inc. (FNKO - Free Report) .

Civeo sports a Zacks Rank #1 at present. The company has a trailing four-quarter earnings surprise of 1,565.1%, on average. Shares of the company have surged 51.8% in the past year.

The Zacks Consensus Estimate for CVEO’s 2022 sales and earnings per share (EPS) suggests growth of 12.5% and 1,450%, respectively, from the year-ago period’s levels.

Bluegreen Vacations flaunts a Zacks Rank #1. BVH has a trailing four-quarter earnings surprise of 85.9%, on average. The stock has surged 33.6% in the past year.

The Zacks Consensus Estimate for BVH’s current financial year sales and EPS indicates growth of 11.5% and 28.7%, respectively, from the year-ago period’s reported levels.

Funko carries a Zacks Rank #2 (Buy). FNKO has a trailing four-quarter earnings surprise of 78.7%, on average. Shares of the company have declined 8.8% in the past year.

The Zacks Consensus Estimate for Funko’s current financial year sales and EPS suggests growth of 24.7% and 28.9%, respectively, from the year-ago period’s reported levels.