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Factors Setting The Tone For Choice Hotels (CHH) Q3 Earnings

Published 11/05/2018, 10:37 PM
Updated 07/09/2023, 06:31 AM

Choice Hotels International, Inc. (NYSE:CHH) is scheduled to report third-quarter 2018 financial results on Nov 8, before market opens. Notably, the company’s earnings have surpassed the Zacks Consensus Estimate in three out of the trailing four quarters, average beat being 5.2%.

What to Expect?

The Zacks Consensus Estimate for third-quarter earnings is pegged at $1.15, which marks growth of 21.1% from the year-ago quarter. Meanwhile, the Zacks Consensus Estimate for revenues stands at $324.2 million, reflecting growth of nearly 10% from the prior-year quarter.

Let’s delve deeper to find out how the company’s top and bottom lines perform this earnings season.

Factors at Play

Increased demand for lodging, robust growth of pipeline of hotels and dominant franchisee base are major factors that are likely to drive Choice Hotel’s results in the to-be-reported quarter. Further, continuous enhancement of the mid-scale brand and acquisition of the WoodSpring brand bode well for the company. Transformation and advancement of the Comfort and Cambria brands are also well poised to boost growth. Management continues to expand its international footprint in new countries, alongside domestic growth.

Per the Zacks Consensus Estimate, domestic RevPAR is expected to increase 1.5% in the to-be-reported quarter. Also, the company expects a lower effective tax rate of 22.5%.

The company generates 99% of its revenues from the franchise business. We believe franchising will facilitate ROE expansion and boost earnings growth in the to-be-reported quarter. Also, the company’s commitment toward franchisee profitability will drive incremental revenues. In fact, hotel franchising revenues in the second quarter witnessed a rise of 14%.

Choice Hotels International, Inc. Price and Consensus

Choice Hotels International, Inc. Price and Consensus | Choice Hotels International, Inc. Quote

What Does the Zacks Model Unveil?

Our proven model does not show that Choice Hotels’ is likely to beat earnings estimates in the third quarter. This is because a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Choice Hotels’ has an Earnings ESP of 0.00% and a Zacks Rank #4 (Sell).

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies in the Consumer Discretionary space, which per our model have the right combination of elements to post earnings beat this quarters.

Discovery, Inc. (NASDAQ:DISCA) has a Zacks Rank #3 and an Earnings ESP of +11.9%. The company is expected to report quarterly results on Nov 8.

WillScot Corporation (NASDAQ:WSC) has an Earnings ESP of +195.24% and a Zacks Rank #3. The company is anticipated to report quarterly results on Nov 8.

Strategic Education, Inc. (NASDAQ:STRA) has an Earnings ESP of +9.35% and a Zacks Rank #3. The company is anticipated to report quarterly results on Nov 8.

You can see the complete list of today’s Zacks #1 Rank stocks here.

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