It's been a good week for Choice Hotels International, Inc. (NYSE:CHH) shareholders, because the company has just released its latest quarterly results, and the shares gained 7.4% to US$93.82. It looks like a pretty bad result, all things considered. Although revenues of US$211m were in line with analyst predictions, statutory earnings fell badly short, missing estimates by 59% to hit US$0.26 per share. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Following the latest results, Choice Hotels International's ten analysts are now forecasting revenues of US$1.01b in 2021. This would be a notable 19% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to jump 68% to US$3.31. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$1.01b and earnings per share (EPS) of US$3.41 in 2021. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but the analysts did make a minor downgrade to their earnings per share forecasts.
The consensus price target held steady at US$91.00, with the analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic Choice Hotels International analyst has a price target of US$112 per share, while the most pessimistic values it at US$79.00. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Choice Hotels International's past performance and to peers in the same industry. The analysts are definitely expecting Choice Hotels International's growth to accelerate, with the forecast 19% growth ranking favourably alongside historical growth of 4.2% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 22% next year. Choice Hotels International is expected to grow at about the same rate as its industry, so it's not clear that we can draw any conclusions from its growth relative to competitors.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Happily, there were no real changes to sales forecasts, with the business still expected to grow in line with the overall industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Choice Hotels International going out to 2024, and you can see them free on our platform here..
And what about risks? Every company has them, and we've spotted 3 warning signs for Choice Hotels International (of which 2 are significant!) you should know about.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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