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A month has gone by since the last earnings report for Choice Hotels (CHH). Shares have added about 7.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Choice Hotels due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Choice Hotels Q3 Earnings Top Estimates, Revenues Lag
Choice Hotels delivered mixed third-quarter 2024 results, with earnings beating the Zacks Consensus Estimate but revenues missing the same. However, both metrics increased on a year-over-year basis.
The quarter’s performance was backed by the effective execution of its growth strategy. The company accelerated unit growth and expanded its global pipeline. CHH also increased its international presence and significantly grew the size of the company’s rewards program.
Owing to this solid performance, Choice Hotels raised its adjusted net income, adjusted earnings per share (EPS) and revenue per available room (RevPAR) guidance for 2024. Moreover, the company's versatile business model and accretive growth strategies ensure the support required to foster its growth trends.
Going forward, CHH believes that it is well-positioned to deliver bottom-line growth as well as maintain shareholder value on the back of the aforementioned business strategies against the improving demand backdrop.
CHH’s Q3 Earnings and Revenues
Choice Hotels reported adjusted EPS of $2.23, which beat the Zacks Consensus Estimate of $1.91 by 16.8%. It reported adjusted EPS of $1.82 in the prior-year quarter.
Quarterly revenues of $428 million missed the consensus mark of $436.4 million by 1.9%. On the other hand, the metric grew 1% from the year-ago level of $425.6 million.
Franchising & Royalties of CHH
Royalty, licensing and management fees decreased 1% year over year to $147.2 million. During the three months ended Sept. 30, domestic RevPAR declined 250 basis points (bps) year over year.
System-wide effective royalty rate increased 6 bps year over year to 5.05%.
Operating Results of CHH
Total operating expenses declined 5% year over year to $276.2 million. Our estimate for the metric was $290.9 million.
Adjusted EBITDA was $177.6 million, up 14% year over year. We expected the metric to be $174.9 million.
CHH’s Balance Sheet
As of Sept. 30, 2024, Choice Hotels had cash and cash equivalents of $58.6 million compared with $26.8 million as of Dec. 31, 2023.
Long-term debt at the end of the third quarter was $1.81 billion compared with $1.07 billion reported in 2023-end.