Choice Hotels International Inc.
) reported fourth-quarter 2012 adjusted earnings from continuing
operations of 45 cents, breezing past the Zacks Consensus
Estimate by 4 cents. The results missed the year-ago earnings by
a penny. The company's top line growth and cost saving
initiatives boosted the quarterly earnings. In full-year 2012,
earnings were $2.11 per share; ahead of the year-ago earnings of
On a reported basis, fourth quarter earnings were 42 cents; in
line with the year earlier quarter. In 2012, earnings were $2.07
versus $1.85 in the year-earlier period.
Revenues increased 7% year over year to $178.3 million in the
quarter. The revenues surpassed the Zacks Consensus Estimate of
$173 million. In 2012, revenues surged 8% year over year to
Inside the Headline Numbers
During the fourth quarter, franchising revenues were $77.0
million, up 4% year over year with the rise in the revenues for
the company's other categories. Royalty fees soared 5% annually
to $66.0 million.
Revenue per available room (RevPAR) witnessed a 4.2% rise
domestically with the surge in occupancy and average daily rates.
System-wide effective royalty rate was 4.36%, up 5 basis points
(bps) from the year earlier quarter.
Gross operating margin was up about 210 bps annually to 25.4%
during the fourth quarter. Adjusted franchising margin nudged up
400 bps annually to 60.8%.
The company has entered into 473 domestic hotel franchise
agreements up 42% year over year.
Update on Hotel Rooms
During the quarter under review, Choice Hotels has entered
into 214 domestic hotel franchise agreements. These consist of
174 refurbishment projects and 40 new constructions. As of
December 31, 2012, the company's pipeline included 482 hotels,
consisting of almost 38,969 rooms worldwide. The company
currently franchises 6,200 hotels with nearly 499,000 rooms
across the U.S. and 30 other countries.
At quarter end, Choice Hotels had cash and cash equivalents of
$134.2 million while its long-term debt was $847.2 million.
Shareholder Value Enhanced
The company bought back 0.5 million shares worth $19.9 million
in 2012 whereas it did not buy back any shares in the fourth
quarter. The company can buy additional 1.4 million shares under
its current share repurchase authorization.
In 2012, the hotelier paid $654.1 cash dividend with $600.7
million special cash dividend.
For first-quarter 2013, earnings are expected to be
approximately 26 cents per share. The company anticipates RevPAR
growth of 5% in the quarter.
For full-year 2013, the company expects that its earnings per
share will be between the range of $1.96-$1.98 per share. RevPAR
growth is expected between 4.5% and 5.5% in 2013. Net domestic
unit is likely to grow by 1.5%, whereas effective royalty rate
would rise by 3 bps in the year.
Effective tax rates are expected to be within 28.5% and 30.6%
in the quarter as well in 2013.
Given its significant expansion plan, international exposure,
strong brand recognition and better financial performance we
believe the company is likely to grow going forward.
Additionally, the hotelier's continuous enhancement of
shareholders' value augurs well for the company.
However, we remain cautious on the stock based on its lowered
earnings guidance and current economic condition.
Choice Hotels currently carries a Zacks Rank #2 (Buy). Another
Wyndham Worldwide Corporation
) recently declared its fourth quarter 2012 adjusted earnings of
63 cents per share, ahead of the Zacks Consensus Estimate of 60
cents per share and increased 34% year over year. Wyndham
currently carries a Zacks Rank #2 (Buy).
Some other hotel companies worth a mention include
The Marcus Corporation
Intercontinental Hotels Group plc
) which carry a Zacks Rank #1 (Strong Buy) and a Zacks Rank #2
CHOICE HTL INTL (CHH): Free Stock Analysis
INTERCONTL HTLS (IHG): Free Stock Analysis
MARCUS CORP (MCS): Free Stock Analysis Report
WYNDHAM WORLDWD (WYN): Free Stock Analysis
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