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Choice Hotels' (CHH) Q4 Earnings & Revenues Top Estimates

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Choice Hotels International, Inc. CHH reported fourth-quarter 2021 results, wherein earnings and revenues surpassed the Zacks Consensus Estimate. The top and bottom lines improved on a year-over-year basis. Earnings beat the Zacks Consensus Estimate for the third straight quarter.

Patrick Pacious, president and CEO, Choice Hotels, stated, “The past year was truly remarkable for Choice Hotels, as we have positioned the company to benefit from the acceleration of consumer trends that favor leisure travel, limited-service hotels and longer stay occasions.”

Q4 Earnings and Revenues

Choice Hotels reported adjusted earnings of 99 cents per share, which beat the consensus mark of 81 cents by 22.2%. The bottom line surged 98% from the prior-year quarter’s figure of 50 cents.

In the quarter under review, total revenues were $284.6 million, which outpaced the consensus mark of $281 million by 1.5%. The metric rose 47.2% 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 fourth quarter, domestic royalty fees totaled $93.6 million, up 14% from the 2019 comparable period. Domestic system-wide revenue per available room (RevPAR) increased 13.9% from third-quarter 2019 levels. The uptick was driven by a 9.5% growth in average daily rate (ADR) and a 210 basis-point increase in occupancy levels.

In 2021, the company awarded 528 domestic franchise agreements, up 24% year over year. For 2021, the company's domestic franchise agreements for conversion and new construction hotels rose by 17% and 39%, respectively, compared with the same period of 2020.

As of Dec 31, 2021, the number of domestic hotels and rooms declined 0.8% and 1.2% year over year, respectively.

Operating Results

Total operating expenses during fourth-quarter 2021 increased 5.8% year over year to $177.6 million. Adjusted EBITDA rose 76.1% from the prior-year quarter’s figure to $95.2 million.

Balance Sheet

As of Dec 31, 2021, Choice Hotels had cash and cash equivalents of $511.6 million compared with $234.8 million on Dec 31, 2020.

Long-term debt at the end of the fourth quarter was $844.1 million compared with $843.8 million reported in third-quarter 2021-end. Goodwill, as a percentage of total assets, came in at 8.2% compared with 8.5% at third-quarter 2021-end.

For 2021, the company paid out a cash dividend of $25 million. During fourth-quarter 2021, the company declared an increase of 6% to the annual dividend rate to $0.2375 per common share.

2022 Outlook

For 2022, the company expects to witness adjusted EBITDA and RevPAR growth, compared to 2021. The company's domestic effective royalty rate is likely to rise in the mid-single digits for full-year 2022, compared to full-year 2021.

Other Updates

The number of domestic hotels in the upscale segment rose 13% year over year, owing to increase in unit count for both the Cambria Hotels brand and Ascend Hotel Collection.

Coming to the extended-stay portfolio, the company witnessed rapid expansion, thereby reaching 474 domestic hotels as of Dec 31, 2021. This highlighted an increase of 6% on a year-over-year basis. The domestic extended-stay pipeline comprised 340 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 880 hotels, thereby reflecting nearly 75,000 rooms.

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

Key Picks

Some better-ranked stocks from the Zacks Consumer Discretionary sector are Crocs, Inc. CROX, RCI Hospitality Holdings, Inc. RICK and JAKKS Pacific, Inc. JAKK.

Crocs flaunts a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 41.6%, on average. Shares of Crocs have increased 24.6% in the past year.

The Zacks Consensus Estimate for CROX’s 2022 sales and EPS indicates a rise of 48.5% and 23.2%, respectively, from the year-ago period’s levels.

RCI Hospitality sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 63.2%, on average. Shares of RCI Hospitality have gained 17% in the past year.

The Zacks Consensus Estimate for RICK’s 2022 sales and EPS suggests growth of 33.9% and 19.6%, respectively, from the year-ago period’s levels.

JAKKS Pacific flaunts a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 48.9%, on average. Shares of JAKKS Pacific have appreciated 35.1% in the past year.

The Zacks Consensus Estimate for JAKK’s 2022 sales and EPS suggests growth of 4.9% and 227.8%, respectively, from the year-ago period’s levels.


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