Choice Hotels Int'l Q2 Results Top Estimates, Boosts 2014 Outlook

(RTTNews) - Global hotel franchisor Choice Hotels International, Inc. (CHH) reported Friday a profit for the second quarter that increased from last year, reflecting revenue growth and improved franchising margins.

Both earnings per share and quarterly revenues topped analysts' expectations. The company also provided earnings guidance for the third quarter, below Street view, but raised earnings forecast for the full-year 2014.

"During the second quarter, momentum in our core lodging business was very strong and we are pleased with our performance, which exceeded our expectations. We achieved continued net domestic unit growth, strong development results and a nearly 8% percent increase in domestic RevPAR," President and CEO Stephen Joyce said in a statement.

The company has restated its results for the year-ago quarter.

The Silver Spring, Maryland-based company reported net income of $35.40 million or $0.60 per share for the second quarter, higher than $31.81 million or $0.54 per share in the prior-year quarter.

On average, 15 analysts polled by Thomson Reuters expected the company to report earnings of $0.49 per share for the quarter. Analysts' estimate typically excludes special items.

Total revenues for the quarter increased 4 percent to $197.64 million from $190.93 million in the same quarter last year, and topped ten Wall Street analysts' consensus estimate of $193.28 million.

Royalty fees for the quarter grew 7 percent to $78 million, while marketing and reservation revenues remained flat with last year at $104 million from the prior-year quarter. The system-wide effective royalty rate decreased six basis points to 4.28 percent from the year-ago quarter's 4.34 percent.

Franchising revenues increased 8 percent to $93.83 million, and franchising margins improved 270 basis points to 68.8 percent from a year ago.

New domestic hotel franchise contracts during the second quarter grew 20 percent to 125 from the 104 contracts executed in the same quarter last year.

Domestic royalty fees grew 7 percent $71.2 million, and domestic unit growth was 1.8 percent, and room growth was 0.9 percent over last year.

Domestic system-wide revenue per available room or RevPAR grew 7.6 percent to $49.08 from the year-ago quarter, due to a 280 basis points improvement in occupancy to 63.0 percent. Average daily rate increased 2.9 percent to $77.92 from last year.

Operating income for the quarter grew 10 percent to $60.15 million from last year, and total operating expenses was $137.51 million, up 1 percent from the year-ago quarter.

Looking ahead to the third quarter, Choice Hotels anticipates earnings of $0.62 per share, while analysts are expecting earnings of $0.68 per share.

For fiscal 2014, the company raised its earnings guidance to a range of $1.92 to $1.96 per share from the prior forecast of $1.87 to $1.93 per share. Street is looking for full-year 2014 earnings of $1.92 per share.

"We are optimistic that our performance will continue to be strong in the second half of 2014," Joyce added.

CHH closed Thursday's regular trading session at 46.54, down $0.64 on a volume of 0.10 million shares.