NORTH BETHESDA, Md. - Choice Hotels (NYSE:CHH) International, Inc. (NYSE: CHH), a leading lodging franchisor, reported its fourth quarter earnings, revealing a mixed financial performance. The company posted Q4 adjusted EPS of $1.44, surpassing analyst expectations by $0.10. However, revenue for the quarter was $358.4 million, falling short of the consensus estimate of $369.44 million.
Despite the earnings beat, the company's stock declined by 1.5% as the provided EPS guidance for the full year 2024 ranged between $6.30 and $6.60, below the analyst consensus of $6.75. This guidance indicates potential challenges ahead, which has seemingly caused investor concern.
For the full year of 2023, Choice Hotels achieved record total revenues, growing 10% to $1.5 billion compared to the previous year. Adjusted EBITDA for the year reached a company record of $540.5 million, a 13% increase from 2022 and exceeding the top end of the company's guidance. Full-year 2023 adjusted diluted EPS also exceeded guidance, increasing 16% to $6.11 compared to 2022.
Patrick Pacious, President and CEO of Choice Hotels, attributed the company's robust performance to the successful strategy of adding hotels that generate higher royalties per unit and the rapid integration of Radisson Hotels Americas. He expressed confidence in the company's outlook for 2024, despite the more conservative EPS guidance.
The company's hotel mix of domestic upscale, extended stay, and midscale portfolio increased by 1.4% for hotels and 1.6% for rooms since December 31, 2022. The global pipeline for conversion rooms saw a significant increase, expanding by 16% from September 30, 2023, and 34% from the end of 2022.
Choice Hotels remains committed to its proposed combination with Wyndham Hotels & Resorts, which is expected to create value for franchisees and shareholders. The company has nominated a slate of independent directors to stand for election at Wyndham's 2024 Annual Meeting of Stockholders, signaling progress on the regulatory front.
The company's balance sheet reflects a strong liquidity position, with approximately $650 million available as of December 31, 2023. This financial stability supports the company's confidence in pursuing its growth strategies and shareholder return programs.
InvestingPro Insights
Choice Hotels International, Inc. (NYSE: CHH) has demonstrated an impressive financial resilience as highlighted in their recent earnings report. The company's strategic management decisions and robust hotel portfolio are echoed in the InvestingPro data and tips.
InvestingPro Tips for Choice Hotels indicate that management has been actively buying back shares and maintaining dividend payments for 20 consecutive years, which can be appealing to investors looking for companies with a shareholder-friendly track record. Moreover, the company's gross profit margins have been impressive, with a gross profit margin of 90.64% over the last twelve months as of Q1 2023, signaling efficient operations and strong pricing power.
From the data standpoint, Choice Hotels boasts a market capitalization of $5.75 billion USD, reflecting its significant presence in the lodging industry. The P/E ratio stands at 21.32, which adjusts to a slightly lower 18.54 when considering the last twelve months as of Q1 2023. This could suggest that the stock is potentially more attractively priced on a historical earnings basis. However, the company is trading at a high Price / Book multiple of 80.78, which might raise valuation concerns for some investors.
Revenue growth has also been positive, with a 13.37% increase over the last twelve months as of Q1 2023, although there was a slight quarterly dip of -4.12% in Q1 2023. This growth is indicative of the company's ability to expand its revenue streams despite the competitive landscape.
For investors interested in further insights, there are additional InvestingPro Tips available for Choice Hotels, which can be accessed by visiting https://www.investing.com/pro/CHH. By using the coupon code PRONEWS24, readers can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking even more in-depth analysis and data to inform their investment decisions.
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