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Why Is Choice Hotels (CHH) Up 6.4% Since Last Earnings Report?
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A month has gone by since the last earnings report for Choice Hotels (CHH - Free Report) . Shares have added about 6.4% 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 its most recent earnings report in order to get a better handle on the important catalysts.
Choice Hotels Beats on Q3 Earnings & Revenues, Ups View
Choice Hotels reported better-than-expected third-quarter 2019 results. The top and the bottom line not only surpassed their respective Zacks Consensus Estimate but also increased on a year-over-year basis.
The lodging franchisor reported adjusted earnings of $1.37 per share, beating the consensus mark of $1.29 and increasing 10% year over year. Notably, this marked its seventh straight quarter of earnings beat.
In the quarter under review, total revenues came in at $310.7 million. The figure increased 7% from the year-ago quarter’s level and topped the consensus mark of $307 million.
Let’s discuss the quarterly numbers.
Franchising & Royalties
Domestic royalty fees totaled $107.8 million, up 3% year over year. However, domestic system-wide RevPAR dipped 0.7% year over year. Average daily rate (ADR) declined 0.4% and occupancy was down 20 basis points compared with the prior-year quarter’s level.
The company’s newly-executed domestic franchise agreements were 100 in the third quarter. As of Jun 30, 2019, the number of domestic franchised hotels and rooms rose 1.8% and 1.8% year over year, respectively.
Operating Results
Total operating expenses increased 15.5% from third-quarter 2018 to $208.3 million. Adjusted EBITDA also increased 7% from the prior-year quarter’s number to $111 million.
Balance Sheet
As of Sep 30, 2019, the company had cash and cash equivalents of $31.6 million compared with $26.6 million on Dec 31, 2018.
Long-term debt in the same period was $875.8 million, up from $753.5 million at 2018-end. Goodwill, as a percentage of total assets, was 11.6% at the end of the second quarter, down from 14.8% at 2018-end.
In the first nine months of 2019, Choice Hotels paid cash dividends of $36 million. Based on the current quarterly dividend rate of 21.5 cents per share, the company expects to payout dividends worth approximately $48 million in 2019. Meanwhile, management repurchased roughly $0.6 million shares for nearly $45 million under the share repurchase program during the said period. As of Sep 30, 2019, it authorized up to 4 million additional shares of common stock under the share repurchase program.
Fourth-Quarter Guidance
For the fourth quarter, adjusted earnings per share (EPS) are anticipated in the range of 82-86 cents. Notably, the guidance is below the Zacks Consensus Estimate of 90 cents. Domestic RevPAR is expected between 0% and 2%.
2019 Guidance
Choice Hotels now expects EPS between $4.21 and $4.27, up from prior expectation of $4.16-$4.22. Domestic RevPAR is expected to be in the range of flat to down 1%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -5.56% due to these changes.
VGM Scores
At this time, Choice Hotels has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, 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 downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Choice Hotels has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Choice Hotels (CHH) Up 6.4% Since Last Earnings Report?
A month has gone by since the last earnings report for Choice Hotels (CHH - Free Report) . Shares have added about 6.4% 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 its most recent earnings report in order to get a better handle on the important catalysts.
Choice Hotels Beats on Q3 Earnings & Revenues, Ups View
Choice Hotels reported better-than-expected third-quarter 2019 results. The top and the bottom line not only surpassed their respective Zacks Consensus Estimate but also increased on a year-over-year basis.
The lodging franchisor reported adjusted earnings of $1.37 per share, beating the consensus mark of $1.29 and increasing 10% year over year. Notably, this marked its seventh straight quarter of earnings beat.
In the quarter under review, total revenues came in at $310.7 million. The figure increased 7% from the year-ago quarter’s level and topped the consensus mark of $307 million.
Let’s discuss the quarterly numbers.
Franchising & Royalties
Domestic royalty fees totaled $107.8 million, up 3% year over year. However, domestic system-wide RevPAR dipped 0.7% year over year. Average daily rate (ADR) declined 0.4% and occupancy was down 20 basis points compared with the prior-year quarter’s level.
The company’s newly-executed domestic franchise agreements were 100 in the third quarter. As of Jun 30, 2019, the number of domestic franchised hotels and rooms rose 1.8% and 1.8% year over year, respectively.
Operating Results
Total operating expenses increased 15.5% from third-quarter 2018 to $208.3 million. Adjusted EBITDA also increased 7% from the prior-year quarter’s number to $111 million.
Balance Sheet
As of Sep 30, 2019, the company had cash and cash equivalents of $31.6 million compared with $26.6 million on Dec 31, 2018.
Long-term debt in the same period was $875.8 million, up from $753.5 million at 2018-end. Goodwill, as a percentage of total assets, was 11.6% at the end of the second quarter, down from 14.8% at 2018-end.
In the first nine months of 2019, Choice Hotels paid cash dividends of $36 million. Based on the current quarterly dividend rate of 21.5 cents per share, the company expects to payout dividends worth approximately $48 million in 2019. Meanwhile, management repurchased roughly $0.6 million shares for nearly $45 million under the share repurchase program during the said period. As of Sep 30, 2019, it authorized up to 4 million additional shares of common stock under the share repurchase program.
Fourth-Quarter Guidance
For the fourth quarter, adjusted earnings per share (EPS) are anticipated in the range of 82-86 cents. Notably, the guidance is below the Zacks Consensus Estimate of 90 cents. Domestic RevPAR is expected between 0% and 2%.
2019 Guidance
Choice Hotels now expects EPS between $4.21 and $4.27, up from prior expectation of $4.16-$4.22. Domestic RevPAR is expected to be in the range of flat to down 1%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -5.56% due to these changes.
VGM Scores
At this time, Choice Hotels has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, 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 downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Choice Hotels has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.