On Thursday, Truist Securities adjusted its financial outlook for Choice Hotels (NYSE:CHH) International, Inc. (NYSE:CHH), reducing the stock price target to $144 from the previous $146, while retaining a Hold rating on the stock. The revision comes as Truist Securities modifies its earnings projections for the hotel company.
The firm's 2024 estimated EBITDA (earnings before interest, taxes, depreciation, and amortization) has been slightly increased to $593 million from $590 million, while the adjusted earnings per share (EPS) forecast has been decreased to $6.40 from $6.48.
Looking ahead to 2025, the estimated EBITDA has been revised downward to $605 million from $609 million, with the adjusted EPS projection also seeing a reduction to $6.69 from $6.79.
The new stock price target of $144 is based on a 14.0 times multiple applied to the firm's 2025 estimated EBITDA, a decrease from the prior multiple of 15.0 times. This adjustment reflects a more conservative valuation approach by Truist Securities.
Choice Hotels' current trading valuation stands at 11.6 times and 11.2 times the firm's 2024 and 2025 estimated EBITDA, respectively. This pricing reflects the market's current assessment of the company's future earnings potential. The revised price target and earnings estimates provide investors with updated guidance on the expected financial performance of Choice Hotels in the coming years.
InvestingPro Insights
In light of the recent financial outlook adjustment by Truist Securities for Choice Hotels International, Inc. (NYSE:CHH), InvestingPro offers further insights into the company's performance metrics and stock behavior. With a market capitalization of $5.25 billion and a current P/E ratio of 23.26, the company's valuation is a critical factor for investors to consider. Notably, the adjusted P/E ratio for the last twelve months as of Q1 2024 shows a slight decrease to 19.69, indicating a more favorable earnings perspective relative to the stock price.
Choice Hotels boasts an impressive gross profit margin of 90.08% for the same period, which speaks to the company's efficiency in maintaining profitability despite operational costs. Moreover, the firm has been consistent in rewarding shareholders, maintaining dividend payments for 21 consecutive years, with a current dividend yield of 1.05%.
InvestingPro Tips highlight that the stock is currently trading near its 52-week low and is considered to be in oversold territory according to the RSI, suggesting potential for a rebound. Moreover, analysts predict the company will remain profitable this year, which aligns with the positive outlook on its earnings potential.
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