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Category: Stock Market and Choice Hotels
Date: 6 November 2019 Stock Price: $89.89 We take a look at the 3rd quarter earnings report of their 2019 fiscal year of Choice Hotels, one of the largest lodging franchisors in the world with over 7,000 hotels in over 40 countries.
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About Choice Hotels
Choice Hotels International, Inc. (NYSE: CHH) is one of the largest lodging franchisors in the world. With more than 7,000 hotels, representing nearly 575,000 rooms, in over 40 countries and territories as of September 30, 2019, the Choice® family of hotel brands provides business and leisure travelers with a range of high-quality lodging options from limited-service to full-service hotels in the upscale, midscale, extended stay and economy segments.
Financial overview of LGI Homes 3rd quarter 2019 earnings report
Data below refers to the latest quarter's data unless specified otherwise
- Revenues: $310.732 million (up from $291.490 million for the same quarter of the previous year)
- Revenues increased by 6.6% over the last 12 months
- Operating expenses: $208.320 million (up from $180.322 million for the same quarter of the previous year)
- Operating expenses increased by 15.5% over the last 12 months
- Net income: $76.239 million (down from $79.959 million for the same quarter of the previous year)
- Diluted earnings per share: $1.36 (down from $1.41 for the same quarter of the previous year)
- PE ratio of Choice Hotels: 16.5
- Dividend declared: $0.215
- Dividend yield of Choice Hotels: 0.9%
- Diluted number of shares in issue: 55.64 million (down from 56.7 million for the same quarter of the previous year)
- Cash and cash equivalents: $31.569 million
- Cash and cash equivalents per share: $056
- Cash and cash equivalents makes up 0.63% of Choice Hotels' market capital
- Cash and cash equivalents makes up 2.29% of Choice Hotels' total assets
- Accounts receivable: $171.802 million
- Accounts receivable makes up 12.5% of Choice Hotels' total assets
- Cash generated from operations (for the 9 months): $190 million
- Cash generated from operations per share (for the 9 months): $3.41
Choice Hotels management commentary on their 3rd quarter 2019 earnings and fiscal guidance
ROCKVILLE, Md., Nov. 5, 2019 /PRNewswire/ -- Choice Hotels International, Inc. (NYSE: CHH), one of the world's largest lodging franchisors, today reported its results for the three months ended September 30, 2019.
Highlights include:
Additionally, during the third quarter of 2019, the company continued to strengthen its presence in the higher growth and more revenue intense upscale, midscale and extended stay chain scale segments. In particular, the company:
"We're pleased to report another quarter of strong financial performance and a positive outlook for the growth of the business," said Patrick Pacious, president and chief executive officer, Choice Hotels. "We are successfully leveraging our strong customer base and growing our franchising platform to drive revenue in high-value segments. Specifically, Cambria is leading the evolution of our portfolio to become more revenue intense by attracting business travelers in top RevPAR markets. Our investments in Cambria are not only driving the brand's growth, but also benefiting the entire portfolio through new technology, increased brand recognition, and other key franchisee resources."
Highlights include:
- Net income was $76.2 million for third quarter 2019, representing diluted earnings per share (EPS) of $1.36.
- Adjusted net income, excluding certain items described in Exhibit 6, increased 9% to $76.5 million from third quarter 2018.
- Adjusted EPS was $1.37, a 10% increase from third quarter 2018.
- The company exceeded the top end of its third quarter 2019 adjusted EPS guidance by $0.08 per share and raised its full year adjusted EPS guidance.
- Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for the third quarter were $111.0 million, an increase of 7% from the same period of 2018.
- The company's upscale, midscale, and extended stay segments reported a 3.1% aggregate increase in unit growth compared to third quarter 2018.
- The company's board of directors approved an increase in the company's share repurchase authorization by approximately 2.3 million shares, bringing the total program to 4.0 million shares authorized.
Additionally, during the third quarter of 2019, the company continued to strengthen its presence in the higher growth and more revenue intense upscale, midscale and extended stay chain scale segments. In particular, the company:
- Achieved 13% growth in the number of domestic rooms in its upscale brands, Cambria and Ascend, as of September 30, 2019, from third quarter 2018.
- Installed the 500th new sign for newly refreshed Comfort hotels, announcing to guests the significant transformation of the brand. Under this $2.5 billion transformation of the brand, revenue per available room (RevPAR) for Comfort hotels that have completed renovations outpaced their competitive set by 60 basis points and franchise agreements awarded in 2019 are expected to generate higher revenues throughout the life of the contracts, compared to the pipeline of the same period of the prior year period.
- Continued its leadership in the midscale segment with 25 Clarion Pointe franchise agreements awarded year-to-date, bringing the number of Clarion Pointe hotels open or awaiting conversion to 45 hotels. Additionally, the Sleep Inn brand achieved 2.6% growth in the number of domestic hotels and 10% domestic pipeline growth, bringing the total Sleep Inn pipeline to 150 hotels.
- Expanded the number of domestic hotels in its extended stay brands to nearly 400, a 10% increase from September 30, 2018, and increased the extended stay domestic pipeline by 11% to over 250 hotels.
"We're pleased to report another quarter of strong financial performance and a positive outlook for the growth of the business," said Patrick Pacious, president and chief executive officer, Choice Hotels. "We are successfully leveraging our strong customer base and growing our franchising platform to drive revenue in high-value segments. Specifically, Cambria is leading the evolution of our portfolio to become more revenue intense by attracting business travelers in top RevPAR markets. Our investments in Cambria are not only driving the brand's growth, but also benefiting the entire portfolio through new technology, increased brand recognition, and other key franchisee resources."
Outlook
The adjusted numbers in the company's outlook below exclude the net surplus or deficit generated from the company's marketing and reservation system activities, the gain (loss) on sale and impairment of assets as well as other items. See Exhibit 7 for the calculation of adjusted forecasted results and the reconciliation to the comparable GAAP measures.
The adjusted numbers in the company's outlook below exclude the net surplus or deficit generated from the company's marketing and reservation system activities, the gain (loss) on sale and impairment of assets as well as other items. See Exhibit 7 for the calculation of adjusted forecasted results and the reconciliation to the comparable GAAP measures.
- Net income for full-year 2019 is expected to range between $209 million and $213 million, or $3.74 and $3.80 per share.
- Adjusted EPS for full-year 2019 is expected to range between $4.21 and $4.27. The company expects full-year 2019 adjusted net income to range between $235 million and $239 million.
- Fourth quarter 2019 adjusted EPS is expected to range between $0.82 and $0.86.
- Adjusted EBITDA for full-year 2019, including owned hotel operations, is expected to range between $362 million and $365 million.
- The company's outlook for adjusted EBITDA and adjusted EPS is based on the current number of shares of common stock outstanding and, therefore, do not reflect any subsequent changes that may occur due to new equity grants or further repurchases of common stock under the company's stock repurchase program.
- Net domestic units for 2019 are expected to increase by approximately 2%.
- Domestic RevPAR for the fourth quarter of 2019 is expected to decline between a range of 0% and 2% versus the same period of the prior year. Domestic RevPAR is expected to decline between a range of 0% and 1% for full-year 2019.
- The domestic effective royalty rate is expected to increase between 9 and 12 basis points for full-year 2019, as compared to full-year 2018.
- The effective tax rate is expected to be approximately 23% for fourth quarter 2019 and 18% for full-year 2019, respectively.
Choice Hotels (NYSE: CHH) stock price history
The image below, obtained from Google, shows the stock price history of LGI Homes over the last 5 years. And its been a decent time for Choice Hotels investors over the last 5 years. 5 years ago Choice Hotels stock was trading at around $52.70 a share and its currently trading at $89.89 a share. That's a healthy return of 71% provided to stockholders of Choice Hotels over the last 5 years.
The stock of Choice Hotels is trading at a lot closer to its 52 week high of $94.78 than it is to its 52 week low of $66.71 which to us is a clear indication that the short term momentum and sentiment of Choice Hotels stock is very positive.
The stock of Choice Hotels is trading at a lot closer to its 52 week high of $94.78 than it is to its 52 week low of $66.71 which to us is a clear indication that the short term momentum and sentiment of Choice Hotels stock is very positive.
Recent coverage of Choice Hotels
The extract below discusses the latest leadership changes at Choice Hotels as obtained from TheStreet.com
ROCKVILLE, Md., Nov. 5, 2019 /PRNewswire/ -- Choice Hotels International, Inc. (NYSE: CHH), one of the world's largest hotel franchisors, has promoted Raúl Ramírez to senior vice president of international strategic planning and global head of financial planning and analysis.In this expanded capacity, Ramírez will lead the financial and strategic long-range planning organizations for Choice's international division as well as the global financial planning and analysis and revenue assurance organizations. Additionally, Ramírez will assume oversight for Choice's corporate development and strategic investment efforts outside the U.S. and also provide leadership to the international division's finance market leads. He will continue to report to Dominic Dragisich, chief financial officer, Choice Hotels. "Raúl has been a valuable member of the finance leadership team and a major contributor to Choice's financial strategy and growth," said Dragisich. "His deep knowledge of the company and innate business savvy make him the perfect person to help take Choice's global business to new heights and drive shareholder return for years to come."
ROCKVILLE, Md., Nov. 5, 2019 /PRNewswire/ -- Choice Hotels International, Inc. (NYSE: CHH), one of the world's largest hotel franchisors, has promoted Raúl Ramírez to senior vice president of international strategic planning and global head of financial planning and analysis.In this expanded capacity, Ramírez will lead the financial and strategic long-range planning organizations for Choice's international division as well as the global financial planning and analysis and revenue assurance organizations. Additionally, Ramírez will assume oversight for Choice's corporate development and strategic investment efforts outside the U.S. and also provide leadership to the international division's finance market leads. He will continue to report to Dominic Dragisich, chief financial officer, Choice Hotels. "Raúl has been a valuable member of the finance leadership team and a major contributor to Choice's financial strategy and growth," said Dragisich. "His deep knowledge of the company and innate business savvy make him the perfect person to help take Choice's global business to new heights and drive shareholder return for years to come."
Choice Hotels (NYSE: CHH) stock valuation
Based on Choice Hotels latest earnings report and their fiscal guidance provided what do we value their stock at? Based on the earnings reported and the fiscal guidance provided our valuation model provides a target (full value) price for Choice Hotels stock at $73.60 a stock. We therefore believe that stock of Choice Hotels is overvalued
We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target price which in this case is $73.60. We therefore believe a good entry point into the stock of Choice Hotels is at $66.30 or below.
Since the stock of Choice Hotels is trading at well above our recommended entry point into the stock we rate the stock of Choice Hotels as a sell
We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target price which in this case is $73.60. We therefore believe a good entry point into the stock of Choice Hotels is at $66.30 or below.
Since the stock of Choice Hotels is trading at well above our recommended entry point into the stock we rate the stock of Choice Hotels as a sell
Next earnings release of Choice Hotels
It is expected that Choice Hotels 4th quarter and full fiscal 2019 earnings report will be released in early February 2020