Hotel franchisor Choice Hotels (NYSE: CHH) missed Wall Street’s revenue expectations in Q1 CY2025, with sales flat year on year at $332.9 million. Its non-GAAP profit of $1.34 per share was 2% below analysts’ consensus estimates.
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Choice Hotels (CHH) Q1 CY2025 Highlights:
- Revenue: $332.9 million vs analyst estimates of $346.7 million (flat year on year, 4% miss)
- Adjusted EPS: $1.34 vs analyst expectations of $1.37 (2% miss)
- Adjusted EBITDA: $129.6 million vs analyst estimates of $131.3 million (38.9% margin, 1.3% miss)
- Management lowered its full-year Adjusted EPS guidance to $7.06 at the midpoint, a 0.7% decrease
- EBITDA guidance for the full year is $625 million at the midpoint, in line with analyst expectations
- Operating Margin: 24%, up from 18.1% in the same quarter last year
- Free Cash Flow was $9.92 million, up from -$31.04 million in the same quarter last year
- RevPAR: $46.28 at quarter end, up 12.6% year on year
- Market Capitalization: $5.87 billion
"Choice Hotels generated another quarter of record financial performance and RevPAR outperformance, demonstrating the successful execution of our growth strategy," said Patrick Pacious, President and Chief Executive Officer.
Company Overview
With almost 100% of its properties under franchise agreements, Choice Hotels (NYSE: CHH) is a hotel franchisor known for its diverse brand portfolio including Comfort Inn, Quality Inn, and Clarion.
Sales Growth
A company’s long-term sales performance can indicate its overall quality. Any business can have short-term success, but a top-tier one grows for years. Regrettably, Choice Hotels’s sales grew at a sluggish 7.3% compounded annual growth rate over the last five years. This was below our standard for the consumer discretionary sector and is a tough starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new property or trend. Choice Hotels’s recent performance shows its demand has slowed as its annualized revenue growth of 3.6% over the last two years was below its five-year trend. 
We can better understand the company’s revenue dynamics by analyzing its revenue per available room, which clocked in at $46.28 this quarter and is a key metric accounting for daily rates and occupancy levels. Over the last two years, Choice Hotels’s revenue per room averaged 1.5% year-on-year growth. Because this number is lower than its revenue growth, we can see its sales from other areas like restaurants, bars, and amenities outperformed its room bookings. 
This quarter, Choice Hotels’s $332.9 million of revenue was flat year on year, falling short of Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 4.3% over the next 12 months, similar to its two-year rate. This projection is underwhelming and implies its newer products and services will not lead to better top-line performance yet.
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Operating Margin
Choice Hotels’s operating margin has been trending up over the last 12 months and averaged 26.9% over the last two years. On top of that, its profitability was elite for a consumer discretionary business thanks to its efficient cost structure and economies of scale.
In Q1, Choice Hotels generated an operating profit margin of 24%, up 5.9 percentage points year on year. This increase was a welcome development and shows it was more efficient.
Earnings Per Share
We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.
Choice Hotels’s EPS grew at a decent 10.4% compounded annual growth rate over the last five years, higher than its 7.3% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
In Q1, Choice Hotels reported EPS at $1.34, up from $1.28 in the same quarter last year. Despite growing year on year, this print slightly missed analysts’ estimates, but we care more about long-term EPS growth than short-term movements. Over the next 12 months, Wall Street expects Choice Hotels’s full-year EPS of $6.98 to stay about the same.
Key Takeaways from Choice Hotels’s Q1 Results
We struggled to find many positives in these results. Its revenue missed and its EPS fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock remained flat at $125.10 immediately after reporting.
Choice Hotels didn’t show it’s best hand this quarter, but does that create an opportunity to buy the stock right now? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.
