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Choice Hotels' (CHH) Q2 Earnings Miss, Revenues Top Estimates

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Choice Hotels International, Inc. CHH reported second-quarter 2022 results, with earnings missing the Zacks Consensus Estimate, but revenues beating the same. The top and the bottom line increased on a year-over-year basis. Earnings lagged the Zacks Consensus Estimate after beating in the trailing four quarters. Following the results, the company’s shares increased 4.4% on Aug 5.

Patrick Pacious, president and chief executive officer of Choice Hotels, stated, “The acquisition of Radisson Hotels Americas, which is expected to close this month, will mark the next chapter in Choice's well-established asset-light strategy of investing in higher revenue segments and locations, and build on our strong track record of growing the brands of tomorrow. We are confident in our ability to accelerate the growth of Radisson Hotels Americas' brands by leveraging Choice's scale, network of owner relationships and strong digital platforms.”

Q2 Earnings and Revenues

Choice Hotels reported adjusted earnings of $1.43 per share, which missed the consensus mark of $1.47 by 2.7%. The bottom line increased 17.2% from the prior-year quarter’s figure of $1.22.

In the quarter under review, total revenues came in at $368 million, which surpassed the consensus mark of $327 million by 12.4%. However, the metric rose 32% from the year-ago quarter’s levels.

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

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

Franchising & Royalties

During the second quarter, domestic royalty fees totaled $121.4 million, up 14% compared to the same period in 2021. Domestic revenue per available room (RevPAR) increased 13% from second-quarter 2019 levels.  The uptick was driven by 13.7% growth in average daily rate (ADR).

In the second quarter, the company awarded 122 domestic franchise agreements, up 4% year over year. The company's extended-stay portfolio continues to expand its footprint.

As of Jun 30, 2022, the number of domestic hotels and rooms declined 1.4% and 2.9% year over year, respectively.

Operating Results

Total operating expenses during second-quarter 2022 increased 34% year over year to $213.9 million. Adjusted EBITDA rose 15.9% from the prior-year quarter’s figure to $129.6 million.

Balance Sheet

As of Jun 30, 2022, Choice Hotels had cash and cash equivalents of $607.2 million compared with $511.6 million as of Dec 31, 2021.

Long-term debt at the end of the second quarter was $844.7 million compared with $844.1 million reported in the fourth-quarter 2021-end. Goodwill, as a percentage of total assets, came in at 7.6% compared with 8.1% at the first-quarter 2022-end.

2022 Outlook

In 2022, the company expects RevPAR to increase in the range of 11-13% as compared to the full year of 2019.

Other Updates

Coming to the extended-stay portfolio, the company witnessed rapid expansion, thereby reaching 489 domestic hotels as of Jun 30, 2022. This highlighted an increase of 6.3% on a year-over-year basis. The domestic extended-stay pipeline comprised 362 hotels awaiting conversion, under construction or approved for development.

As of Jun 30, 2022, the company’s total domestic pipeline of hotels awaiting conversion, under construction or approved for development reached 910 hotels, thereby reflecting nearly 84,000 rooms.

The company currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Stocks to Consider

Some other top-ranked stocks in the Consumer Discretionary sector are G-III Apparel Group, Ltd. GIII, Marriott International, Inc. MAR and Playa Hotels & Resorts N.V. PLYA.

G-III Apparel sports a Zacks Rank #1. GIII has a trailing four-quarter earnings surprise of 97.5%, on average. The stock has declined 26.5% in the past year.

The Zacks Consensus Estimate for GIII’s current financial year sales and EPS indicates growth of 13.8% and 8.2%, respectively, from the year-ago period’s reported levels.

Marriott carries a Zacks Rank #2. MAR has a trailing four-quarter earnings surprise of 1.4%, on average. The stock has increased 36.2% in the past year.

The Zacks Consensus Estimate for MAR’s current financial year sales and EPS indicates growth of 44.6% and 93.7%, respectively, from the year-ago period’s reported levels.

Playa Hotels & Resorts carries a Zacks Rank #2. PLYA has a trailing four-quarter earnings surprise of -8.8%, on average. The stock has increased 3.9% in the past year.

The Zacks Consensus Estimate for PLYA’s current financial year sales and EPS indicates growth of 29.9% and 144.4%, respectively, from the year-ago period’s reported levels.


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