CHH: Future Earnings Should Benefit From Expanded International Hotel Openings

Analysts have revised their price target for Choice Hotels International downward by $2 to $99, citing soft domestic rooms growth and the perception of a low-quality third quarter beat.

Analyst Commentary

Following the latest financial results, analysts have identified both positive and negative factors that could affect Choice Hotels International's future performance and valuation. The following summarizes the main perspectives highlighted by the Street:

• Bullish analysts note the company's ability to deliver earnings above expectations, even in the face of slower growth. This demonstrates resilience in execution.
• Valuation remains supported by the company’s stable business model and established market presence, which could provide downside protection for investors.
• Some analysts see potential for improved growth if domestic demand trends recover in coming quarters.

• Bearish analysts highlight the perception of a low-quality earnings beat, with results driven more by one-time items than underlying growth.
• Slower domestic rooms growth is viewed as a headwind to near-term performance and valuation expansion.
• Concerns remain around top-line execution, with uncertainty about the company’s ability to accelerate growth in a competitive lodging sector.
• Downward revisions to the price target signal caution because of current growth headwinds and the potential for limited upside in the near term.

What's in the News

• Choice Hotels International raised its full-year 2025 net income guidance to $353 to $371 million, up from a prior range of $261 to $276 million. Diluted EPS is now projected at $7.52 to $7.89, primarily reflecting a $100 million third-quarter gain from the fair value remeasurement of its previously held stake in Choice Hotels Canada (Key Developments).
• The company is launching MainStay Suites in Australia, marking the brand's first expansion outside North America with seven hotels opening across key cities. This move expands Choice Hotels' Australian portfolio to 163 hotels and 7,487 rooms, solidifying its role as a leading direct franchise player in the region (Key Developments).
• Choice Hotels announced it will almost double its French portfolio by onboarding 50 new properties under the Quality Suites brand, increasing its presence in France from 57 to 107 franchised hotels and expanding to over 30 additional cities (Key Developments).
• Everhome Suites, Choice Hotels' extended stay brand, has opened seven new U.S. properties in strategic markets, growing its national footprint with several more openings expected by the end of the year (Key Developments).
• Cambria Hotels continues to expand, with four new U.S. properties recently opened and a debut in Canada planned for next year, reflecting robust growth in the upscale segment and an expanding room pipeline (Key Developments).

Valuation Changes

• Fair Value Estimate has decreased slightly, from $117.50 to $115.50.
• Discount Rate declined marginally, moving from 9.54% to 9.43%.
• Revenue Growth Projection is nearly unchanged, ticking down from 30.48% to 30.41%.
• Net Profit Margin has risen from 19.79% to 21.04%.
• Future Price-to-Earnings (P/E) Ratio forecast has fallen from 19.37x to 17.41x.