Wyndham Worldwide Corporation’s (WYN) third quarter 2011 adjusted earnings of 94 cents per share breezed past the Zacks Consensus Estimate of 88 cents and improved significantly from 68 cents earned a year ago. On a reported basis, Wyndham delivered earnings of $1.08 per share versus 84 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 Vacation Ownership and Vacation Exchange and Rentals businesses. Share repurchase program also aided the earnings growth, which was partially offset by a higher tax rate.
Net revenue increased 13.8% year over year to $1,212 million in the reported quarter, reflecting a modest adjusted sales momentum across Wyndham’s three business units and substantial contributions from acquisitions. The quarterly revenue missed the Zacks Consensus Estimate of $1,213 million.
Inside the Headline Numbers
The company’s Lodging segment reported revenue of $222.0 million, up 9% year over year driven by a 6.3% rise in RevPAR, market share gain and a gain on reclassification of certain reservation fees.
Revenues from the Vacation Exchange and Rentals segment climbed 32% year over year to $436.0 million. Vacation rental revenues were $260.0 million including $83 million of additional revenue related to acquisitions. Exchange revenues were $161.0 million, flat year over year.
Revenues from Vacation Ownership segment at Wyndham upped 5.0% to $559 million on the back of an increase in gross Vacation Ownership Interest sales and commissions under the Wyndham Asset Affiliation Model.
Hotel Update
At quarter end, Wyndham had approximately 7,190 properties or 611,200 rooms. The development pipeline included over 870 hotels and approximately 115,000 rooms, of which 58% were newly constructed and 62% were international.
Financials
Wyndham exited the quarter with cash and cash equivalents of approximately $175 million. Securitized vacation ownership debt was $1.7 billion.
During the quarter, the company repurchased approximately 10.2 million shares of its common stock at an average price of $29.75 per share.
Guidance
For full-year 2011, management raised its earnings per share guidance range from $2.32–$2.40 to $2.41–$2.45. Earlier management upped its guidance from $2.15–$2.25 to $2.32–$2.40.
Revenue guidance for fiscal 2012 also was also introduced at $4.4–$4.6 million. The adjusted EBITDA is expected between $1.03 billion and $1.06 billion. Adjusted earnings per share are expected in the range of $2.72–$2.82.
Our Take
We expect Wyndham to benefit from its repositioning to a more fee-for-service-based business, free cash flow generation and a series of acquisitions including James Villa Holidays and ResortQuest and thus remain optimistic on the stock. Moreover, the company is strengthening its presence in Europe and Latin America as well as Asian markets like China and India. The continued increase in management guidance depicts the strength in the company’s fundamentals.
One of Wyndham’s competitors Marriott International Inc. (MAR) reported third quarter 2011 earnings of 29 cents per share, up 32% year over year. Wyndham currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are maintaining our long-term Outperform recommendation on the stock.
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