Choice Hotels (CHH) Q4 Earnings Beat Estimates, Rise Y/Y
Choice Hotels International, Inc. CHH delivered mixed fourth-quarter 2023 results, with earnings beating the Zacks Consensus Estimate and revenues missing the same. The top line fell year over year, while the bottom line increased from the prior-year quarter’s figure.
In 2023, the company reported an uptick in growth, exceeding its full-year adjusted EBITDA and adjusted EPS guidance. The upside was propelled by the effective strategy of incorporating hotels with higher royalties per unit. The company expanded its rewards program, extended its geographic reach, utilized platform capabilities and achieved substantial growth through the rapid completion of the Radisson Americas' integration. Given the strategic initiatives and the hotel conversion opportunities, the company is optimistic and anticipates the growth momentum to continue in 2024 and beyond.
Q4 Earnings and Revenues
In the quarter under review, Choice Hotels reported adjusted earnings per share (EPS) of $1.44, beating the Zacks Consensus Estimate of $1.35 by 6.7%. The company reported an adjusted EPS of $1.26 in the prior-year quarter.
Choice Hotels International, Inc. Price, Consensus and EPS Surprise
Choice Hotels International, Inc. price-consensus-eps-surprise-chart | Choice Hotels International, Inc. Quote
Quarterly revenues of $358.4 million missed the consensus mark of $370 million. The metric dropped 1% from the year-ago quarter’s level of $362 million.
Franchising & Royalties
During the fourth quarter, royalty, licensing and management fees increased 1% year over year to $116.9 million. During the quarter, domestic revenues per available room (RevPAR) increased 13.1% from 2019 levels.
During the quarter, the effective royalty rate increased 6 basis points (bps) year over year to 4.99%.
Operating Results
Total operating expenses during fourth-quarter 2023 increased 11% year over year to $316.9 million. Our estimate for the metric was $307.1 million.
During the quarter, adjusted EBITDA came in at $125 million compared with $112.5 million reported in the prior year period. Our estimate for the metric was $121.3 million.
Balance Sheet
As of Dec 31, 2023, Choice Hotels had cash and cash equivalents of $26.8 million compared with $41.6 million as of Dec 31, 2022.
Long-term debt at the end of the fourth quarter was $1.1 billion compared with $1.2 billion reported in the 2022-end.
During the fourth quarter, Goodwill came in at $220.2 million compared with $218.7 million at 2022-end.
2023 Highlights
Total revenues in 2023 came in at $1.5 billion compared with $1.4 billion in 2022.
Adjusted EBITDA in 2023 came in at $540.5 million compared with $478.6 million in 2022.
In 2023, adjusted diluted EPS came in at $6.11 compared with $5.27 reported in the previous year.
Other Updates
In 2023, the company reported a 1.4% year-over-year growth in its domestic upscale, extended stay, and midscale portfolio for hotels and a 1.6% year-over-year increase in rooms. Specifically, the domestic upscale and extended stay rooms expanded by 6.3% and 14.9% year over year, respectively, during the same period. The increase was fueled by an uptick in the number of Cambria Hotels, Ascend Hotel Collection, WoodSpring Suites, MainStay Suites, and Suburban Studios units. As of Dec 31, 2023, the company's overall domestic system size reached over 6,300 hotels and nearly 497,000 rooms.
2024 Outlook
For 2024, the company anticipates adjusted net income in the range of $316-$331 million. Adjusted EBITDA is expected to be between $580 million and $600 million. The company anticipates adjusted diluted EPS in the range of $6.3-$6.60. The Zacks Consensus Estimate for 2024 earnings is pegged at $6.82.
Domestic RevPAR growth in 2024 is estimated at approximately 2% compared with 2023 levels. For the same period, the company’s domestic effective royalty rate is anticipated to increase in the mid-single digits on a year-over-year basis.
Zacks Rank & Key Picks
Choice Hotels currently has a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Zacks Consumer Discretionary sector are as follows:
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The Zacks Consensus Estimate for RCL’s 2024 sales and EPS indicates a rise of 14.1% and 44%, respectively, from the year-ago period’s levels.
H World Group Limited HTHT currently sports a Zacks Rank of 1. It has a trailing four-quarter earnings surprise of 94.5%, on average. The stock has declined 28.5% in the past year.
The Zacks Consensus Estimate for HTHT’s 2024 sales and EPS indicates an improvement of 7.2% and 7.1%, respectively, from the year-ago period’s levels.
Playa Hotels & Resorts N.V. PLYA carries a Zacks Rank #2 (Buy). It has a trailing four-quarter earnings surprise of 346.7%, on average. The stock has gained 9.8% in the past year.
The Zacks Consensus Estimate for PLYA’s 2024 sales indicates a rise of 3.4% from the year-ago levels.
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