Choice Hotels (CHH) PT Raised to $59 at UBS

UBS raised its price target on Choice Hotels (NYSE: CHH) to $59.00 (from $40.00) while maintaining a Sell rating.

Analyst Robin Farley comments "We currently forecast +3.1% industry RevPAR growth for this yr after +3.2% growth in
FY'16, based on our proprietary analysis of macro outputs and lodging demand. Our '18E RevPAR forecast is at +2.8%, based on slight acceleration of structural spend to 7% in '18E from 5% in '17E, steady capacity utilization of 75.2% (in line with '17E of 75.2%) and based on Fed's longer-term unemployment rate of 4.5%-5.0%. Supply growth in U.S. is expected to accelerate to 2.7% in '18E, up from 2.3% growth in '17. We note that lodging stocks have moved ahead of any potential benefit from corporate tax cuts helping to increase structural spending, a factor that correlates strongly with S. lodging demand in our regression analysis. We believe a potential pick-up in structural spend offers risk to the upside for RevPAR outlook."

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