Wyndham Beats on Both Lines - Analyst Blog

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Wyndham Worldwide Corporation 's ( WYN ) first quarter 2012 adjusted earnings of 60 cents per share surpassed the Zacks Consensus Estimate of 55 cents and improved 36% year over year.

On a reported basis, Wyndham delivered earnings of 21 cents per share versus 41 cents in the prior-year quarter.

The increase was mainly driven by higher revenue per available room (RevPAR) in the Lodging business as well as strong operational performance of the Vacation Ownership business. The performance of the Vacation Exchange and Rentals business was remarkable, considering the challenging economic environment in Europe. The company's share repurchase program also aided the earnings growth.

Net revenue increased 9% year over year to $1,036 million in the reported quarter, reflecting growth across Wyndham's Vacation Ownership and Hotel businesses. Quarterly revenue also came ahead of the Zacks Consensus Estimate of $1,008 million.

Inside the Headline Numbers

The company's Lodging segment reported revenue of $185.0 million for the quarter, up 24% year over year, driven by a 7.0% rise in RevPAR, market share gain and a gain on reclassification of certain reservation fees.

Revenues from the Vacation Exchange and Rentals segment crept up 1.4% year over year to $361.0 million. However, in constant currency, excluding the impact of acquisitions, segment revenues were flat. Vacation rental revenues were $159.0 million, up 6% and Exchange revenues were $188.0 million, down 3% year over year.

Revenues from the Vacation Ownership segment at Wyndham upped 11.0% to $501 million, on the back of an increase in Vacation Ownership Interest sales.

Hotel Update

At the end of the quarter, Wyndham owned approximately 7,150 properties or 609,300 rooms. The development pipeline included over 840 hotels and around 108,200 rooms, of which 56% were newly constructed and 55% were in the international market.

Financials

Wyndham exited the quarter with cash and cash equivalents of approximately $240 million. Securitized vacation ownership debt was $2.0 billion.

During the quarter, the company repurchased approximately 3.6 million shares of its common stock at an average price of $42.05 per share. To enhance the shareholders' value, the board of directors also approved an additional share repurchase worth $750 million.

Guidance

For full-year 2012, management continues to expect revenue in the range of $4.4-$4.6 million and adjusted EBITDA between $1.03 billion and $1.06 billion. However, Wyndham raised its earnings per share guidance range from $2.85-$3.00 to $3.00-$3.15.

Our Take

 

We expect Wyndham to benefit from its repositioning to a more fee-for-service-based business, free cash flow generation and increased global travel demand and thus remain optimistic on the stock.

 

Moreover, the company is strengthening its presence in Europe and Latin America as well as in the Asian markets of China and India. The continued increase in earnings guidance and additional share repurchase depicts the strength in the company's fundamentals.

One of Wyndham's competitors Marriott International Inc. ( MAR ) reported first-quarter 2012 adjusted earnings per share of 30 cents, which surpassed the Zacks Consensus Estimate by a penny as well as the year-ago quarter adjusted earnings of 23 cents.

Wyndham, which also competes with Starwood Hotels & Resorts Worldwide Inc. ( HOT ), currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are maintaining our long-term Neutral recommendation on the stock.


 
STARWOOD HOTELS ( HOT ): Free Stock Analysis Report
 
MARRIOTT INTL-A ( MAR ): Free Stock Analysis Report
 
WYNDHAM WORLDWD ( WYN ): Free Stock Analysis Report
 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: HOT , MAR , WYN

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