Choice Hotels Q1 Earnings Lag Estimates, FY25 View Trimmed, Stock Down

Choice Hotels International, Inc. CHH delivered first-quarter 2025 results, with earnings and revenues missing the Zacks Consensus Estimate. However, both metrics increased on a year-over-year basis.

The company also trimmed its outlook for 2025. Shares of the company declined 3.6% during yesterday’s trading session, post the earnings release.

According to president and CEO Patrick Pacious, the company’s distinctive market position has helped it outperform competitors, capture greater market share and remain resilient during times of economic uncertainty. With a more balanced growth model, a stronger customer base and an expanded brand portfolio, particularly in the cycle-resistant extended-stay segment, Choice Hotels is now better positioned for both short-term stability and sustained long-term growth.

CHH’s Q1 Earnings and Revenues

Choice Hotels reported adjusted EPS of $1.34, which missed the Zacks Consensus Estimate of $1.38 by 2.9%. It reported adjusted EPS of $1.28 in the prior-year quarter. (See the Zacks Earnings Calendar to stay ahead of market-making news.)

Quarterly revenues of $332.9 million lagged the consensus mark of $347 million by 4.1%. The metric increased 0.3% from the year-ago level of $331.9 million. During the three months ended March 31, domestic RevPAR increased 230 basis points (bps) year over year to $46.28.

Franchising & Royalties of CHH

Franchise and management fees increased 1.2% year over year to $145.1 million. On the other hand, Partnership services and fees, and Owned hotels were $25.4 million and $27.9 million,  respectively, up 27.9% and 11.5% year over year. Other and revenues for reimbursable costs from franchised and managed properties were $11.2 million and $123.4 million, respectively, down 24.4% and 4.3%, year over year.

System-wide effective royalty rate increased 6 bps year over year to 5.11%.

Operating Results of CHH

Total operating expenses declined 6.9% year over year to $252.9 million. Our estimate for the metric was $253.3 million.

Adjusted EBITDA was $129.6 million, up 4.2% year over year. We expected the metric to be $133.6 million.

CHH’s Balance Sheet

As of March 31, 2025, Choice Hotels had cash and cash equivalents of $40.1 million compared with $40.2 million as of Dec. 31, 2024.

Long-term debt at the end of the first quarter was $1.87 billion compared with $1.77 billion reported in 2024-end.

Other Updates of CHH

In first-quarter 2025, the company’s domestic net rooms portfolio increased 2.3% year over year. Domestic upscale, extended stay and midscale units expanded 3.6%. The global net rooms portfolio rose 2.8% to 647,587. International net rooms portfolio expanded 4.4% to 141,986.

As of March 31, 2025, the company’s global pipeline was more than 95,000 rooms, with around 79,000 rooms in the domestic market.

CHH’s 2025 Outlook

For 2025, the company anticipates adjusted net income in the range of $324-$339 million, down from the prior estimate of $333-$345 million. Adjusted EBITDA is expected to be between $615 million and $635 million, down from the earlier estimate of $625 million to $640 million. The company anticipates adjusted diluted EPS in the range of $6.90-$7.22 compared with the prior estimate of $6.98-$7.24.

Domestic RevPAR growth in 2025 is estimated to be in the range of down 1% to up 1% compared with the earlier estimate of up 1% to 2%. For the same period, the company’s domestic effective royalty rate is anticipated to increase in the mid-single digits on a year-over-year basis. Global net system room growth is estimated at approximately 1% compared with 2024 levels.

CHH’s Zacks Rank

Choice Hotels currently has a Zacks Rank #3 (Hold).

Key Picks

Some better-ranked stocks from the Zacks Consumer-Discretionary sector are Bally's Corporation BALY, WW International, Inc. WW and Sportradar Group AG SRAD.

Bally's presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
 
The company delivered a trailing four-quarter negative earnings surprise of 166.2%, on average. The stock has declined 17% in the past month. The consensus estimate for Bally's 2025 sales and EPS implies growth of 4.4% and 76.3%, respectively, from the year-ago levels.

WW International presently holds a Zacks Rank of 2 (Buy).
 
It delivered a trailing four-quarter earnings surprise of 88.2%, on average. The stock has gained 139.8% in the past month. The consensus estimate for WW International’s 2026 EPS implies growth of 48.8% from the year-ago levels.
 
Sportradar Group presently carries a Zacks Rank #2.
 
The consensus estimate for Sportradar Group’s 2025 sales and EPS implies growth of 15.8% and 172.7%, respectively, from the year-ago levels. Sportradar Group stock has surged 143.5% in the past year.

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This article originally published on Zacks Investment Research (zacks.com).

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