Choice Hotels (CHH) lags third-quarter earnings estimates

Choice Hotels (CHH) exited with quarterly earnings of $1.56 per share, missing Zacks consensus estimate of $1.75 per share. That compares to earnings of $1.51 per share a year ago. These figures are adjusted for non-recurring items.

This quarterly report represents a profit surprise of -10.86%. A quarter ago, this hotel franchisor was expected to post earnings of $1.47 per share when it was actually earning $1.43, delivering a surprise -2.72% .

In the past four quarters, the company has exceeded consensus EPS estimates twice.

Choice Hotels, which is part of the Zacks Hotels and Motels industry, reported revenue of $414.27 million for the quarter ended September 2022, beating the Zacks consensus estimate by 8.92%. That compares to revenues of $323.37 million a year ago. The company has exceeded consensus revenue estimates three times in the past four quarters.

The sustainability of the immediate stock price movement based on recently released numbers and future earnings forecasts will primarily depend on management’s comments on the earnings call.

Choice Hotels shares have lost about 17.7% year-to-date compared to a -20.9% decline for the S&P 500.

What’s next for Choice Hotels?

With Choice Hotels outperforming the market so far this year, the question on investors’ minds is: what’s next for the stock?

There are no easy answers to this key question, but one reliable metric that can help investors answer it is the company’s earnings outlook. This includes not only the current consensus earnings expectations for the upcoming quarter(s), but also how those expectations have changed recently.

Empirical research shows a strong correlation between short-term stock movements and trends in earnings estimate revisions. Investors can track these revisions on their own or rely on a proven scoring tool like Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Before that Press release, the trend of estimate revisions for Choice Hotels: favorable. While the magnitude and direction of estimate revisions may change following the release of the company’s earnings report, the current situation results in a Zacks No. 2 (buy) ranking for the stock. Thus, stocks are expected to outperform the market in the near future. You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how the estimates for the next few quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $1.23 on $349.47 million in revenue for the upcoming quarter and $5.33 on $1.36 billion in revenue for the current fiscal year.

Investors should be aware that the outlook for the sector can also have a significant impact on stock performance. In terms of Zacks industry rankings, hotels and motels currently make up 17% of Zacks more than 250 industries. Our research shows that the top 50% of industries ranked by Zacks outperform the bottom 50% by a factor of more than 2 to 1.

Hilton Grand Vacations (HGV), another stock in the same sector, has not yet released its results for the quarter ended September 2022. The results are expected to be released on November 9.

This company is expected to post quarterly earnings of $0.75 per share in its next report, representing a year-over-year change of -16.7%. The consensus EPS estimate for the quarter remained unchanged for the past 30 days.

Hilton Grand Vacations revenue is expected to be $906.05 million, down 2.4% from the prior year quarter.

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