5 Reasons to Add China Lodging Group to Your Portfolio Now
China Lodging Group, Limited HTHT is a leading and fast-growing multi-brand hotel group in China with leased and owned, manachised (franchised-and-managed) and franchised models. As of Mar 31, 2017, the company had a total of 3,336 hotels or 335,900 hotel rooms in operation spread across 369 cities.
With primary focus on economy and midscale hotel segments, China Lodging Group’s brands include Hi Inn, HanTing Hotel, Elan Hotel, JI Hotel, Starway Hotel, Joya Hotel, and Manxin Hotel. We are positive on this Zacks Rank #1 (Strong Buy) company’s prospects and believe it to make a value addition to your portfolio. You can see the complete list of today’s Zacks #1 Rank stocks here.
What Makes China Lodging Group a Solid Pick?
Stock Price Movement: China Lodging Group’s shares have rallied 49.2% over the past six months widely outperforming the Zacks categorized Hotels & Motels industry’s gain of 10.4%. We believe higher earnings growth, given solid revenue per available room (RevPAR) trends, should aid the stock in maintaining its solid performance in the quarters ahead.
RevPar Growth: Notably, the company witnessed strong RevPAR growth in the recently reported (May 10) first quarter of 2017, on the back of improving market conditions, continuous upgrade to HanTing 2.0 as well as the economy segment's stronger performance and the company’s direct sales efforts. These factors along with continuously growing demand for its midscale hotels should continue to drive growth in RevPar.
Moreover, increase in both average daily rate (ADR) and occupancy lead to strong same-hotel RevPAR growth in the first-quarter. In fact, the company expects this trend to continue throughout the rest of the year.
Earnings & Revenue Growth: Arguably, nothing is more important than earnings growth as surging profit levels is often an indication of strong prospects (and stock price gains) for the company in question.
While China Lodging Group’ has a historical earnings per share (EPS) growth rate of 25.6% compared with the industry average of 8.7%, investors should really focus on its projected growth. The company is looking to grow at a rate of 30.5% higher than the industry average of 7.4%.
Propelling the earnings forward is the company’s solid revenue growth story. Notably, the projected sales growth for the current year is 5.6%, which is higher than the broader industry’s estimate of 3.6%.
Return on Equity: China Lodging Group delivered return on equity (ROE) of 14% in the trailing 12 months compared with the industry’s gain of 7.1%. This supports its growth potential and indicates that the company reinvests more efficiently compared with its peers.
Earnings History and Estimate Revisions: China Lodging Group’s earnings surpassed the Zacks Consensus Estimate consistently over the past eight consecutive quarters, with an average positive surprise of 36.43% in the trailing four quarters.
Moreover, the Zacks Consensus Estimate for China Lodging Group’s current year’s earnings has moved up 5.4%, reflecting two upward revisions versus none downward, over the last 60 days. Also, next year’s earnings estimates have inched up 4.7%, on the back of two upward revisions versus no downward revision. All these positive earnings estimate revisions testifies the unwavering confidence that analysts have in the company and also adds to the optimism in the stock.
Other Stocks to Consider
Other top-ranked stocks in the broader Consumer Discretionary sector include Intrawest Resorts Holdings, Inc. SNOW, Marriott International, Inc. MAR and Marriott Vacations Worldwide Corporation VAC. While Intrawest Resorts sports the same Zacks Rank as China Lodging Group, Marriott International and Marriott Vacations carry a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for Intrawest Resorts Holdings’ fiscal 2017 earnings climbed 24.4%, over the past 60 days. Moreover, the trailing four-quarter average positive surprise is 4.11%.
The Zacks Consensus Estimate for Marriott International’s 2017 earnings climbed 3.3%, over the past 60 days. Further, the company’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with an average beat of 5.21%.
The Zacks Consensus Estimate for Marriott Vacations’ 2017 earnings moved up nearly 1%, over the last 60 days. Further, for 2017, EPS is expected to improve 10.8%.
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