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Leading hospitality company Wyndham Worldwide Corporation’s (WYN - Analyst Report) third-quarter 2013 adjusted earnings of $1.41 per share beat the Zacks Consensus Estimate of $1.36 by 3.7% and grew 25% year over year. Higher top line, improved EBITDA and lower share count boosted earnings per share in the quarter.

Net revenue grew 13% year over year to $1.43 billion in the quarter, beating the Zacks Consensus Estimate of $1.41 billion. Solid growth in all three operating segments aided quarterly sales.

Inside the Headline Numbers

Wyndham has three operating segments including Lodging, Vacation Exchange and Rentals and Vacation Ownership. All the three segments have both domestic and international operations.

Wyndham’s Lodging segment revenues grew 19% year over year to $297.0 million in the third quarter, led by a 5.2% rise in domestic revenue per available room (RevPAR), increased hotel management reimbursable fees and higher revenue gains from company-owned hotels.

Systemwide, RevPAR grew 3.4%. International RevPAR was affected by an increase in low RevPAR properties in China.

Revenues from the Vacation Exchange and Rentals segment were up 12% year over year to $470.0 million. However, in constant currency, segment revenues were up a moderate 7% year over year (acquisitions excluded).

Vacation rental revenues climbed up 18% year over year to $293.0 million while Exchange revenues were flat at $158.0 million, reflecting the negative currency translation. In constant currency, exchange revenues were up 1%, thanks to a 1.4% rise in average number of members.

Revenues from the Vacation Ownership segment rose 11.0% year over year to $677.0 million, driven by higher gross Vacation Ownership Interest (VOI) sales. Gross VOI sales were up 7% year over year to $536 million, gaining from an 8.7% rise in tour flow.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) grew 12.8% year over year to $378 million during the quarter, riding on higher EBITDA in all three operating segments.

Hotels Update

Wyndham has 7,440 properties with 638,300 guestrooms at the end of the third quarter. Additionally, 900 hotels with nearly 114,000 rooms are currently in the company’s construction pipeline.

Share Repurchase

Wyndham has bought back approximately 2.7 million shares worth $160.0 million in the third quarter. In the period between Oct 1 and Oct 22, Wyndham bought back another 0.8 million shares for $50 million. Currently, it has $732 million remaining under its share repurchase programs as of Oct 22.

Guidance for 2013

Management maintained its revenue and EBITDA guidance for 2013. Wyndham expects revenues to be within $4.925 billion - $5.100 billion while adjusted EBITDA is likely to be in the range of $1.140 billion to $1.165 billion.

Wyndham however increased its earnings guidance for 2013. The company now projects adjusted earnings per share within the range of $3.78 - $3.80, up from the previous estimate of 3.66 - $3.76 per share. Prior to this, management had raised its guidance from the range of 3.60 - $3.70 per share to the range of $3.66 - $3.76.

Guidance for 2014

Wyndham also issued guidance for 2014. It expects revenues to be within $5.250 billion - $5.350 billion while adjusted EBITDA is expected to be in the $1.215 billion to $1.240 billion range. The company anticipates adjusted earnings per share within the range of $4.12 - $4.22 per share.


Our Take

Beating the Zacks Consensus Estimate on both counts and a raised guidance were the high points of Wyndham’s third quarter results. The performance of the company sets a bullish tone for the long term, helped by the consecutive raise in earnings guidance, a strong developmental pipeline, significant international exposure and transition to a greater fee-for-service-based business.

Although Wyndham currently carries a Zacks Rank #4 (Sell) and might witness slowdown in international RevPAR ahead owing to decelerating growth in a number of major emerging economies, we believe Wyndham holds promise in the long term.

Another hotelier Starwood Hotels & Resorts Worldwide Inc. (HOT - Analyst Report) is expected to report its third-quarter earnings results on Oct 25.

Some other hoteliers that are currently performing well include Marriott International Inc. (MAR - Analyst Report) and Orient-Express Hotels Ltd. (OEH - Snapshot Report). Both the companies carry a Zacks Rank #2 (Buy).
 

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