Choice Hotels Q2 Earnings & Revenues Lag, Up Y/Y

Choice Hotels International, Inc. CHH delivered lower-than-expected second-quarter 2024 results, with adjusted earnings and revenues missing the Zacks Consensus Estimate. However, both metrics increased on a year-over-year basis.

The quarter's performance was backed by strong demand trends across the company's diversified portfolio of brands. This uptrend in demand aided in accelerating global hotel openings, expanding international market reach and increasing the size of its rewards program. Moreover, CHH's versatile business model and accretive growth strategies ensure the support required to foster its growth trends.

Going forward, the company 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.

Q2 Earnings and Revenues

Choice Hotels reported adjusted earnings per share of $1.84, which missed the Zacks Consensus Estimate of $1.87 by 1.6%. It reported adjusted EPS of $1.75 in the prior-year quarter.

Franchising & Royalties

Royalty, licensing and management fees inched up 1% year over year to $141.8 million. During the three months ended Jun 30, domestic revenue per available room (RevPAR) experienced an increase of 540 basis points (bps) sequentially but declined 50 bps year over year. In comparison with the same period in 2019, the metric remained high at 11%.

System-wide effective royalty rate increased 5 bps year over year to 5.04%.

Operating Results

Total operating expenses declined marginally 0.2% year over year to $302.5 million. Our estimate for the metric was $298.4 million.

Adjusted EBITDA was $161.7 million, up 6% year over year. We expected the metric to be $170.3 million.

Balance Sheet

As of Jun 30, 2024, Choice Hotels had cash and cash equivalents of $60.4 million compared with $26.8 million as of Dec 31, 2023.

Long-term debt at the end of the second quarter was $1.87 billion compared with $1.07 billion reported in 2023-end.

2024 Outlook Updated

Choice Hotels now anticipates adjusted net income to be in the range of $309.5-$321.5 million compared with the prior estimate of $306-$320 million. Adjusted EBITDA is still expected to be between $580 million and $600 million.

Adjusted EPS is now expected to be in the range of $6.40-$6.65, up from the prior projection of $6.30-$6.60.

Domestic RevPAR year-over-year growth is now estimated to be in the range of -3.5% to -1.5% compared with the prior expected range of flat to up 2%. The domestic effective royalty rate is still forecasted to increase in mid-single digits from the year-earlier level.

Zacks Rank & Recent Consumer Discretionary Releases

Choice Hotels currently has a Zacks Rank #2 (Buy).

Planet Fitness, Inc. PLNT reported stellar second-quarter 2024 results, with adjusted earnings and revenues beating the Zacks Consensus Estimate and increasing year over year.

The quarter's performance was driven by contributions from new store openings, higher royalty revenues and an asset-light growth model. The strength in the contributions from these factors was reflected in the year-over-year increase in system-wide same-store sales. PLNT aims to define its growth prospects by capitalizing on meaningful opportunities across the industry, globally. Also, its aim to deliver enhanced shareholder value bodes well.

Wynn Resorts, Limited WYNN reported lower-than-expected second-quarter 2024 results, wherein adjusted earnings and revenues missed the Zacks Consensus Estimate. On the other hand, both metrics rose year over year.

The quarter's results reflect strong contributions from the Wynn Palace, Wynn Macau and Las Vegas operations, partially offset by softer contributions from the Encore Boston Harbor operations. The company's continuous investments in expanding the business operations on a global scale along with ensuring shareholder value are commendable. This prudent attitude positions WYNN well for growth in 2024 and beyond.

Hyatt Hotels Corporation H delivered second-quarter 2024 results, wherein earnings beat the Zacks Consensus Estimate but revenues missed the same. The company's top line declined year over year.

The timing of Easter, renovations at major resort properties and the lingering impact of the 2023 Maui wildfires affected the company's performance. As of Jun 30, 2024, Hyatt had a pipeline of executed management or franchise contracts of approximately 670 hotels (or about 130,000 rooms). Management anticipates 2024 system-wide RevPAR to rise 3-4% from the 2023 level, down from the prior estimated range of 3-5%.

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