Hotel franchisor Choice Hotels (NYSE: CHH) reported Q1 CY2026 results beating Wall Street’s revenue expectations, with sales up 2.3% year on year to $340.6 million. Its non-GAAP profit of $1.07 per share was 18.8% below analysts’ consensus estimates.
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Choice Hotels (CHH) Q1 CY2026 Highlights:
- Revenue: $340.6 million vs analyst estimates of $332.4 million (2.3% year-on-year growth, 2.5% beat)
- Adjusted EPS: $1.07 vs analyst expectations of $1.32 (18.8% miss)
- Adjusted EBITDA: $125.7 million vs analyst estimates of $131.7 million (36.9% margin, 4.6% miss)
- Management reiterated its full-year Adjusted EPS guidance of $7.03 at the midpoint
- EBITDA guidance for the full year is $639.5 million at the midpoint, in line with analyst expectations
- Operating Margin: 17.6%, down from 24% in the same quarter last year
- Free Cash Flow was -$33.24 million compared to -$25.54 million in the same quarter last year
- RevPAR: $47.45 at quarter end, up 2.5% year on year
- Market Capitalization: $5.37 billion
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
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last five years, Choice Hotels grew its sales at a 16.8% annual 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 2% 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. 
We can better understand the company’s revenue dynamics by analyzing its revenue per available room, which clocked in at $47.45 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 reported modest year-on-year revenue growth of 2.3% but beat Wall Street’s estimates by 2.5%.
Looking ahead, sell-side analysts expect revenue to remain flat over the next 12 months. This projection doesn't excite us and implies its newer products and services will not catalyze better top-line performance yet.
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Operating Margin
Choice Hotels’s operating margin has been trending down over the last 12 months and averaged 28.6% 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 17.6%, down 6.4 percentage points year on year. This contraction shows it was less efficient because its expenses grew faster than its revenue.
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 29% compounded annual growth rate over the last five years. This performance was better than its revenue growth but doesn’t tell us much about its business quality because its operating margin improvement was less than peers.
In Q1, Choice Hotels reported adjusted EPS of $1.07, down from $1.34 in the same quarter last year. This print missed analysts’ estimates. Over the next 12 months, Wall Street expects Choice Hotels’s full-year EPS of $6.69 to grow 7.2%.
Key Takeaways from Choice Hotels’s Q1 Results
It was encouraging to see Choice Hotels beat analysts’ revenue expectations this quarter. On the other hand, its adjusted operating income missed and its EPS fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 2.5% to $114.41 immediately after reporting.
Choice Hotels’s earnings report left more to be desired. Let’s look forward to see if this quarter has created an opportunity to buy the stock. We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here (it’s free).
