Choice Hotels International Inc. on Monday reported a 22 percent decline in profit for the first quarter as higher revenues were more than offset by an increase in expenses, including interest expense. Earnings per share missed analysts’ estimates by a penny, while revenues beat their expectations.
Looking ahead, Choice Hotels’ forecast earnings per share for the second quarter below analysts’ expectations and also lowered its earnings outlook for fiscal 2013. Shares of the company are down almost 6 percent in the regular trading session.
Royalty fees for the latest quarter increased 4 percent to $49.74 million, while initial franchise and relicensing fees surged 49 percent to $3.78 million.
Domestic system-wide revenue per available room, or RevPAR, increased 4.6 percent for the quarter, as occupancy and average daily rates increased 100 basis points and 2.3 percent, respectively.
During the quarter, Choice Hotels executed 83 new domestic hotel franchise contracts, up 30 percent from the year-ago period. The company also entered into a multi-faceted strategic marketing alliance with Bluegreen Corp., which will add 21 Bluegreen Vacation Club Resorts in top vacation destinations to the company’s Ascend Hotel Collection.
Choice Hotels’ first-quarter net income was $15.52 million or $0.26 per share, down from $20.00 million or $0.34 per share last year. On average, 15 analysts polled by Thomson Reuters expected the company to earn $0.27 per share for the quarter. Analysts’ estimates typically exclude special items.
The latest quarter’s results reflect $7.65 million of additional interest expense compared to the prior year, reflecting the financing transactions entered into during the second and third quarters of 2012 in conjunction with the payment of a $600 million special cash dividend on August 23, 2012.
Total revenues for the quarter grew 6 percent to $136.87 million from $129.17 million in the same period last year. Analysts had a consensus revenue estimate of $135.13 million.
Choice Hotels did not pay dividends during the latest quarter as its regular first quarter dividend was paid in December 2012. In addition, the company did not repurchase any shares of its common stock under its share repurchase program during the quarter, but has authorization to buy back up to an additional 1.4 million shares.
Looking ahead to the second quarter, Choice Hotels forecast earnings per share of $0.45 and RevPAR to increase about 4 percent. Analysts expect the company to report earnings per share of $0.53 for the quarter.
For fiscal 2013, Choice Hotels forecast earnings per share in a range of $1.87 to $1.91 and RevPAR to increase between 4.5 and 5.5 percent. Earlier, the company forecast earnings for the year in a range of $1.96 to $1.98 per share. Analysts expect the company to earn $1.97 per share for the year.
The company noted that the full-year outlook includes additional expenses related to its recently announced SkyTouch Technology initiative. The company plans to deploy additional resources towards this growth opportunity and as a result, expects to incur operating expenses in 2013 not contemplated in its previous outlook ranging between $6 million and $8 million for investment in the infrastructure of this division.
SkyTouch Technology is a new division launched by the company, which develops and markets cloud-basedtechnology products to help industry-wide hoteliers improve their efficiency and profitability.
In Monday’s regular session, CHI is trading at $42.59, down $2.71 or 5.98 percent on a volume of 185,551 shares.
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