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Strength Seen in Choice Hotels (CHH): Can Its 5.6% Jump Turn into More Strength?

Choice Hotels (CHH) was a big mover last session on higher-than-average trading volume. The latest trend in earnings estimate revisions might not help the stock continue moving higher in the...

This story originally appeared on Zacks

Choice Hotels (CHH) shares rallied 5.6% in the last trading session to close at $133.41. This move can be attributable to notable volume with a higher number of shares being traded than in a typical session. This compares to the stock's 4.9% gain over the past four weeks.

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Shares of Choice Hotels moved up after Merck announced impressive clinical-trial data for its anti-COVID pill (molnupiravir). Positive investor sentiments were witnessed across the entertainment, leisure and restaurant industry as the drug maker announced its interim analysis of the pill that will lead to lower hospitalization as well as death rates. The data reveals that 7% of unvaccinated trial participants that were given the drug required hospitalization, while 14% of vaccinated participants were given a placebo. Going forward, the industry players are optimistic regarding  this vaccine roll out, which  will diminish the long-term risks associated with their respective business.

This hotel franchiser is expected to post quarterly earnings of $0.83 per share in its upcoming report, which represents a year-over-year change of +25.8%. Revenues are expected to be $349.5 million, up 65.8% from the year-ago quarter.

While earnings and revenue growth expectations are important in evaluating the potential strength in a stock, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.

For Choice Hotels, the consensus EPS estimate for the quarter has remained unchanged over the last 30 days. And a stock's price usually doesn't keep moving higher in the absence of any trend in earnings estimate revisions. So, make sure to keep an eye on CHH going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank 3 (Hold). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

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