Hotel franchisor Choice Hotels (NYSE: CHH) reported Q4 CY2025 results exceeding the market’s revenue expectations, but sales were flat year on year at $390.2 million. Its non-GAAP profit of $1.60 per share was 3.7% above analysts’ consensus estimates.

Is now the time to buy Choice Hotels? Find out by accessing our full research report, it’s free.

"Choice Hotels International delivered another year of record profitability in 2025, driven by our double-digit increase in international rooms, continued leadership in the extended-stay segment, and disciplined portfolio optimization," 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.

Revenue Growth

A company’s long-term sales performance can indicate its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last five years, Choice Hotels grew its sales at a 15.6% compounded annual growth rate. Though this growth is acceptable on an absolute basis, we need to see more than just topline growth for the consumer discretionary sector, which can display significant earnings volatility. This means our bar for the sector is particularly high, reflecting the non-essential and hit-driven nature of the products and services offered. Additionally, five-year CAGR starts around Covid, when revenue was depressed then rebounded.

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 1.7% over the last two years was below its five-year trend. We’re wary when companies in the sector see decelerations in revenue growth, as it could signal changing consumer tastes aided by low switching costs.

Choice Hotels also reports revenue per available room, which clocked in at $49.82 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 was flat. 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. It is sometimes the strategy of hotels to grow ancillary revenues because they are price takers in room revenues.

This quarter, Choice Hotels’s $390.2 million of revenue was flat year on year but beat Wall Street’s estimates by 5.4%.

Looking ahead, sell-side analysts expect revenue to remain flat over the next 12 months. This projection is underwhelming and suggests its products and services will see some demand headwinds.

While Wall Street chases Nvidia at all-time highs, an under-the-radar semiconductor supplier is dominating a critical AI component these giants can’t build without. Click here to access our free report one of our favorites growth stories.

Operating Margin

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Choice Hotels’s operating margin has shrunk over the last 12 months and averaged 28.7% over the last two years. The company’s profitability was mediocre for a consumer discretionary business and shows it couldn’t pass its higher operating expenses onto its customers.

This quarter, Choice Hotels generated an operating margin profit margin of 26%, down 4.6 percentage points year on year. This contraction shows it was less efficient because its expenses increased relative to its revenue.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Choice Hotels’s EPS grew at an unimpressive 27.6% compounded annual growth rate over the last five years. On the bright side, this performance was better than its 15.6% annualized revenue growth and tells us the company became more profitable on a per-share basis as it expanded.

In Q4, Choice Hotels reported adjusted EPS of $1.60, up from $1.55 in the same quarter last year. This print beat analysts’ estimates by 3.7%. Over the next 12 months, Wall Street expects Choice Hotels’s full-year EPS of $6.96 to grow 3.1%.

Key Takeaways from Choice Hotels’s Q4 Results

We enjoyed seeing Choice Hotels beat analysts’ revenue expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. Overall, this print had some key positives. The stock traded up 2% to $111.58 immediately following the results.

Indeed, Choice Hotels had a rock-solid quarterly earnings result, but is this stock a good investment here? 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).