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Choice Hotels International (CHH)
NYSE:CHH
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Choice Hotels
(NYSE:CHH)71Outperform
Positive Factors
Earnings
CHH slightly outperformed the market and lodging coverage after delivering a beat and raising the midpoint of its EBITDA guide.
Revenue Growth
Management is more positive on future RevPAR growth, pointing to a 30% RevPAR premium for its domestic pipeline relative to its existing system.
Negative Factors
Free Cash Flow
Weaker FCF conversion remains a concern as the company deploys more capital to support its move upstream.
Valuation
CHH's current 14x EV/EBITDA valuation seems disconnected vs. its modest EBITDA growth outlook.
Choice Hotels (CHH) vs. S&P 500 (SPY)
Market Cap
$6.75B
Dividend Yield0.8%
Average Volume (3M)414.35K
Price to Earnings (P/E)23.3
Beta (1Y)0.60
Revenue Growth2.63%
EPS Growth23.39%
CountryUS
Employees1,800
SectorConsumer Cyclical
Sector Strength53
IndustryHotels, Lodging & Leisure
Share Statistics
EPS (TTM)6.26
Shares Outstanding46,728,073
10 Day Avg. Volume546,517
30 Day Avg. Volume414,349
Financial Highlights & Ratios
PEG Ratio1.00
Price to Book (P/B)N/A
Price to Sales (P/S)8.66
Price to Cash Flow (P/CF)13.70
P/FCF Ratio20.80
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$146.33Price Target Upside1.57% Upside
Rating ConsensusModerate Sell
Number of Analyst Covering10
Choice Hotels Business Overview & Revenue Model
Company DescriptionChoice Hotels International, Inc. engages in hotel franchising and operations business. It operates through Hotel Franchising, and Corporate and Other segments. The Hotel Franchising segment refers to the hotel franchising operations consisting of the company's several hotel brands. The Corporate and Other segment deals with SkyTouch technology and international operations. The company was founded in 1939 and is headquartered in Rockville, MD.
How the Company Makes MoneyChoice Hotels generates revenue primarily through its franchising model. The company earns money by collecting franchise fees from hotel owners who operate under its brands. These fees include initial franchise fees upon signing a franchise agreement and ongoing royalty fees, which are typically a percentage of the hotel's gross room revenues. Additionally, Choice Hotels charges marketing and reservation system fees, which fund centralized marketing campaigns and reservation services that benefit franchisees. The company also generates revenue through partnerships and agreements with third-party vendors, offering loyalty programs, and providing management and consultancy services to certain properties. Strategic partnerships with online travel agencies and other travel-related services further enhance its revenue streams.
Choice Hotels Financial Statement Overview
Summary
Choice Hotels shows strong revenue growth and profitability with high margins, yet faces risks due to a heavily leveraged balance sheet with negative equity. Cash flow generation is robust, supporting operations despite capital structure concerns.Income Statement
Choice Hotels has demonstrated consistent revenue growth and profitability. The revenue growth rate from 2023 to 2024 was approximately 2.63%, reflecting stable demand in the hospitality sector. The gross profit margin stands at an impressive 100%, unusual for typical hotel operations, indicating potential categorization of costs. Net profit margin improved to 18.91% in 2024, up from 16.74% in 2023, and EBIT margin also increased to 29.26%. The EBITDA margin of 33.20% showcases strong operating efficiency.85
Very Positive
Balance Sheet
The balance sheet reflects significant financial leverage, with a high debt-to-equity ratio due to negative stockholders' equity, indicating potential financial risk. The equity ratio is negative at -1.79%, a result of liabilities exceeding assets. Return on Equity is not meaningful with negative equity. These factors highlight potential instability in financial structure despite operational success.45
Neutral
Cash Flow
Operating cash flow increased to $319.4 million in 2024, showing strong cash generation capability. Free cash flow grew notably by 79.15% from the previous year. The operating cash flow to net income ratio is robust at 1.07, indicating efficient cash conversion. However, the free cash flow to net income ratio is slightly high at 1.07, suggesting prudent expenditure management.75
Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 1.58B | 1.54B | 1.40B | 1.07B | 774.07M | Gross Profit |
| 1.58B | 690.28M | 700.05M | 599.60M | 311.16M | EBIT |
| 463.77M | 375.03M | 478.60M | 428.93M | 122.05M | EBITDA |
| 553.64M | 440.39M | 511.03M | 447.94M | 127.86M | Net Income Common Stockholders |
| 299.67M | 258.51M | 332.15M | 288.96M | 75.39M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 40.18M | 26.75M | 41.57M | 511.61M | 234.78M | Total Assets |
| 2.53B | 2.39B | 2.10B | 1.93B | 1.59B | Total Debt |
| 1.89B | 1.68B | 1.27B | 1.10B | 1.07B | Net Debt |
| 1.85B | 1.65B | 1.23B | 584.36M | 836.70M | Total Liabilities |
| 2.58B | 2.36B | 1.95B | 1.67B | 1.59B | Stockholders Equity |
| -45.27M | 35.60M | 154.66M | 265.88M | -5.75M |
| Cash Flow | Free Cash Flow | |||
| 319.40M | 178.26M | 273.48M | 305.83M | 75.10M | Operating Cash Flow |
| 319.40M | 296.55M | 367.06M | 383.70M | 115.05M | Investing Cash Flow |
| -84.57M | -265.63M | -442.43M | -78.93M | -29.47M | Financing Cash Flow |
| -221.71M | -45.94M | -394.15M | -27.72M | 115.40M |
Choice Hotels Technical Analysis
Neutral
144.07
Price Trends
145.52
Negative
144.06
Positive
133.12
Positive
Market Momentum
-0.77
Positive
42.81
Neutral
39.42
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For CHH, the sentiment is Neutral. The current price of 144.07 is below the 20-day moving average (MA) of 148.67, below the 50-day MA of 145.52, and above the 200-day MA of 133.12, indicating a neutral trend. The MACD of -0.77 indicates Positive momentum. The RSI at 42.81 is Neutral, neither overbought nor oversold. The STOCH value of 39.42 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for CHH.
Choice Hotels Risk Analysis
Choice Hotels disclosed 32 risk factors in its most recent earnings report. Choice Hotels reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Choice Hotels Peers Comparison
Overall Rating
UnderperformOutperform
Sector (60)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
75 Outperform | $8.11B | 28.93 | 41.40% | 1.46% | ― | 6.40% | |
71 Outperform | $6.75B | 23.29 | -661.94% | 0.80% | 2.63% | 23.39% | |
68 Neutral | $63.42B | 42.93 | -41.19% | 0.23% | 9.17% | 42.78% | |
66 Neutral | $74.66B | 32.52 | -144.82% | 0.91% | 5.85% | -18.43% | |
64 Neutral | $13.20B | 10.85 | 36.54% | 0.44% | -6.41% | 511.40% | |
61 Neutral | $19.58B | 32.29 | -27.16% | 1.23% | 6.34% | -11.99% | |
60 Neutral | $13.01B | 10.45 | 0.79% | 3.53% | 1.60% | -22.47% |
* Consumer Cyclical Sector Average
Performance Comparison
CHH
Choice Hotels
144.07
25.17
21.17%
H
Hyatt Hotels
139.87
-16.83
-10.74%
IHG
Intercontinental Hotels Group
126.19
20.91
19.86%
MAR
Marriott International
271.10
26.46
10.82%
HLT
Hilton Worldwide Holdings
259.49
56.41
27.78%
WH
Wyndham Hotels & Resorts
105.27
31.74
43.17%
Choice Hotels Earnings Call Summary
Earnings Call Date: Feb 20, 2025 | % Change Since: -2.45% | Next Earnings Date: May 13, 2025
Earnings Call Sentiment Positive
The earnings call reveals a strong financial performance with significant growth in key segments such as global rooms, business travel, and international presence. However, there are challenges in the hotel development environment and limited expectations for net unit growth, which may temper overall enthusiasm.Highlights
Strong Financial Performance
Choice Hotels exceeded the top end of their guidance with a 12% year-over-year increase in adjusted EBITDA and a 13% increase in adjusted earnings per share for 2024.
Significant Growth in Global Rooms
The company realized a 3.3% year-over-year net increase in global rooms, including a 4.3% net increase for domestic rooms, and opened 21% more hotels worldwide in 2024 compared to the prior year.
Robust Business Travel and Group Segment Growth
Business transient segment grew 14% year-over-year in Q4, and group travel business saw over a 45% increase in revenue from group accounts in Q4.
Expansion in Extended Stay and Upscale Segments
The company added more than 4,500 extended stay rooms in 2024 and expanded the upscale segment by 44% year-over-year.
Increased International Presence
Choice Hotels increased its international rooms portfolio by 4.4% year-over-year, with a 58% increase in hotel openings.
Lowlights
Challenging Hotel Development Environment
Despite an 8% year-over-year increase in the number of new construction hotels opened, the company faced a challenging hotel development environment due to high interest rates and construction costs.
Limited Net Unit Growth Outlook
For 2025, the company expects net global unit and room system size to grow approximately 1% year-over-year, reflecting ongoing challenges in the hotel development sector.
Reimbursable Revenue Deficit
The company operated its reimbursable revenue activities at an $18 million deficit for 2024, with expectations to increase this deficit to $50 million in 2025.
Company Guidance
During the Choice Hotels International Fourth Quarter and Full Year 2024 Earnings Call, the company reported strong financial results, with a 12% year-over-year increase in adjusted EBITDA, reaching $604.1 million, and a 13% increase in adjusted earnings per share, reaching $6.88. The company saw a 3.3% net increase in global rooms, driven by a 4.3% increase in more revenue-intensive domestic rooms. Choice Hotels also experienced a 21% increase in hotel openings worldwide in 2024. The company outperformed the industry in domestic RevPAR by 90 basis points, with a 4.5% increase year-over-year. Additionally, business travel represented approximately 40% of the overall mix, with the business transient segment growing 14% year-over-year in the fourth quarter. Looking ahead to 2025, Choice Hotels expects adjusted EBITDA to range between $625 million and $640 million, with adjusted diluted earnings per share projected to be between $6.98 and $7.24. The company anticipates a 1% year-over-year growth in global unit and room system size and a 1% to 2% year-over-year increase in domestic RevPAR.Choice Hotels Corporate Events
Stock BuybackBusiness Operations and StrategyFinancial Disclosures
Choice Hotels Reports Strong Q4 and 2024 Performance
Positive
Feb 20, 2025
Choice Hotels International reported a strong financial performance for the fourth quarter and full-year 2024, surpassing earnings guidance. The company’s net income increased by 16% to $299.7 million, and its global net rooms system size grew by 3.3%. Key achievements included a strategic partnership with Westgate Resorts, the opening of 407 hotels globally, and a significant expansion of both domestic and international portfolios. Additionally, Choice Hotels enhanced its rewards program, increased revenue per available room (RevPAR), and executed a substantial share repurchase program, reflecting a robust growth strategy and positive outlook for 2025.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.