Choice Hotels (CHH) best second quarter profit estimate, stock – August 6, 2021

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Choice Hotels International, Inc. (CHH Free Report) released second quarter 2021 results, with earnings exceeding Zacks’ consensus estimate and revenue missing. However, the top and bottom results increased year over year.

As a result of the results, the company’s shares rose 3.7% during trading hours on August 5.

Second Quarter Profits and Revenue

The hosting franchisor reported adjusted earnings of $ 1.22 per share, surpassing the consensus mark of 91 cents by 34.1%. In addition, net income increased 838.5% from the 13-cent figure in the previous year quarter.

In the quarter under review, total revenues amounted to $ 278.3 million. The top line missed the consensus mark of $ 298.9 million. However, the metric was up 83.4% from the quarter last year.

Franchise and royalties

In the second quarter, national royalties totaled $ 102.8 million, up 112.8% year over year. Domestic revenue per available room (RevPAR) decreased by 1.1% compared to the second quarter of 2019. However, the company’s domestic RevPAR in June 2021 increased by 4.5% compared to June 2019 The average daily rate increased 23.1%. The occupancy rate increased to 62.3% from 39.1% in the previous year quarter.

The company’s new national franchise agreements in the second quarter of 2021 were 200, up 32% year-over-year. Notably, more than 43% of the deals included hotels in conversion.

As of June 30, 2021, the number of domestic hotels and rooms had increased by 0.6% and 1.6% year-on-year, respectively.

Operating results

Total operating expenses increased 11.7% to $ 159.3 million. Adjusted EBITDA increased 172% from the prior year quarter to $ 111.8 million.

Balance sheet

As of June 30, 2021, Choice Hotels had cash and cash equivalents of $ 308 million, compared to $ 223 million as of March 31, 2021.

Long-term debt at the end of the second quarter was $ 1,059.6 million, which almost matches the $ 1,059.2 million reported at the end of the first quarter of 2021. During the quarter, goodwill, as a percentage of the balance sheet total, stood at 9.2% compared to 10% in the first quarter of 2021.

The company has resumed its share split and buyback program. It said it was paying a cash dividend of $ 12.5 million which was paid in July 2021 on the current quarterly dividend rate of 22.5 cents per share. Notably, for 2021, the company expects to pay a dividend of nearly $ 25 million.

Outlook

Due to uncertainties related to the pandemic, the company has refrained from providing formal guidance for Q3 or 2021. Factors that may impact future operations include the resurgence of COVID-19 cases, the duration and scope of compulsory travel and other restrictions; and a broader macroeconomic recovery.

In July 2021, the company’s RevPAR increased by almost 15% compared to July 2019, mainly driven by occupancy rates of 70% and ADR growth of 10%. For the third quarter of 2021, the company expects the RevPAR for the third quarter of 2021 to increase between mid and high numbers compared to 2019.

Other updates

The company’s upscale, mid-range and extended stay home segments of the company saw a 2.5% and 3.1% increase in units and rooms, respectively, year-over-year.

During the quarter, the number of domestic hotels in the premium segment increased by 24% year-over-year due to an 11% increase in the number of rooms for the Cambria Hotels brand and 28% for Ascend Hotel Collection.

In terms of the extended stay portfolio, the company has grown rapidly, reaching 460 domestic hotels as of June 30, 2021. This notably highlighted an 11% year-over-year increase. Meanwhile, the nation’s extended stay pipeline included 300 hotels awaiting conversion, construction, or development approval.

Since June 30, 2021, the national hotel openings of WoodSpring Suites and MainStay Suites as well as Suburban brands have increased by 6%, 27% and 15% respectively.

As of June 30, 2021, the Company’s total national portfolio of hotels awaiting conversion, construction or approval for development reached 884 hotels, reaching nearly 77,000 rooms.

Zack Rank

Choice Hotels, which shares space with Marriott Vacations Worldwide Corporation (ACC Free report), Marriott International, Inc. (TUE Free report) and Hyatt Hotels Corporation (H Free Report) in the Zacks Hotel and Motel industry, currently carries a Zacks Rank 3 (pending). You can see The full list of Zacks # 1 Rank (Strong Buy) stocks today here.


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