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Nomura Securities Maintains a 'Neutral' on Choice Hotels (CHH); Challenging Franchise Sales Environment

February 21, 2012 10:21 AM EST
Get Alerts CHH Hot Sheet
Price: $126.35 -1.21%

Rating Summary:
    3 Buy, 15 Hold, 4 Sell

Rating Trend: Down Down

Today's Overall Ratings:
    Up: 0 | Down: 0 | New: 0
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Nomura Securities maintains a 'Neutral' on Choice Hotels (NYSE: CHH) price target of $41.00.

Analyst, Harry Curtis, said, "4Q in line with our expectations, while 2012 outlook for decelerating RevPAR appears cautious. 4Q EPS of $0.46 was in line with our expectations and $0.02 ahead of the consensus. However, CHH foresees a challenging franchise sales environment, and expects no system growth this year. CHH guided to 1Q EPS of $0.30 and 8% RevPAR growth; the consensus is $0.28. For 2012, CCH sees EPS of $1.99-$2.04 and EBITDA of $199m- $203m based on RevPAR of 4%-6%. We are forecasting 2012 EPS of $2.15 and the Street is at $1.93. We remain comfortable with our 6.5% 2012 forecast. At 16.6x 2012E EPS, CHH trades at a discount to our target multiple, and its recent average of 17x. CHH’s low unit and earnings growth continue to prohibit a Buy rating, while its ability to use its balance sheet (1.2x leverage/14x coverage) to aggressively ramp up its share repurchase program stops us from getting more negative on the stock."

For an analyst ratings summary and ratings history on Choice Hotels click here. For more ratings news on Choice Hotels click here.

Shares of Choice Hotels closed at $35.60 yesterday.


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