A month has gone by since the last earnings report for Wyndham Worldwide Corp . Shares have added about 2.1% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is WYN due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Wyndham Q1 Earnings Beat Estimates, ’18 EPS View Up
Wyndham reported mixed first-quarter 2018 results, wherein earnings surpassed the Zacks Consensus Estimate while revenues lagged the same.
Adjusted earnings of $1.33 per share beat the consensus estimate of $1.27 by 4.7%. Also, the bottom line increased 31.7% year over year including the benefit of the new income tax. Without such benefit, earnings grew 10% on the back of higher revenues in all three operating segments, hurricane-related insurance recoveries and Wyndham’s share repurchase program, partly offset by higher interest expenses.
Net revenues from continuing operations were $1.19 billion and improved 3.1% from the prior-year quarter on the back of increased contribution from all its segments. However, the top line lagged the consensus estimate of $1.23 billion by 3.4%.
Wyndham had a great deal of benefit from the U.S. corporate tax reform in its first-quarter earnings. The company’s various sales building initiatives like marketing campaigns and partnerships, digital experiences, website development, on-property amenities and travel perks to guests have favored earnings and revenue growth in the quarter.
First-Quarter Unit Performances
Notably, Wyndham has been functioning through its three operating segments: Hotel Group, Destination Network (formerly known as Vacation Exchange and Rentals), and Vacation Ownership.
Hotel Group revenues were $302 million, up 4% from the year-ago figure, reflecting higher franchise and royalty fees, increased pass-through marketing, reservation, as well as growth in Wyndham Rewards revenues.
Domestic same-store RevPAR (revenues per available room) improved 5.6% year over year. At constant currency, global system-wide same store RevPAR increased 4.7% from the prior-year quarter.
Adjusted EBITDA increased 17% to $98 million primarily due to revenue increases, and a net benefit of $6 million from insurance recoveries and costs related to hurricanes.
Revenues at the Destination Network segment were $246 million, reflecting an increase of 1% from the year-ago figure. While exchange revenues per member declined 1%, the average number of members increased 1%.
Adjusted EBITDA increased 3% to $77 million, reflecting cost saving initiatives and hurricane-related insurance recoveries.
Revenues at Vacation Ownership increased 3% year over year to $661 million. The uptick reflects an increase in gross VOI sales as well as higher consumer financing revenues, partially offset by a higher provision for loan losses.
Gross VOI sales in the first quarter increased 6% from the year-ago period. Meanwhile, tour flow was up 8%, whereas volume per guest (VPG) declined 2%.
Adjusted EBITDA increased 6% to $129 million on higher revenues.
Net Income in the quarter totaled $81 million, lower than $127 million in the year-ago quarter. Total expenses amounted to roughly $1 billion in the quarter, up from $969 million in the prior-year quarter.
Adjusted EBITDA from continuing operations increased 10% year over year to $274 million. Results primarily reflect growth in revenues, cost containment efforts and hurricane-related insurance proceeds.
As of Mar 31, 2018, net cash from continuing operations was $1 billion, compared with $123 million in the prior-year level. Total free cash flow (from continuing and discontinued operations) was $99 million in the first quarter, compared with $203 million in the prior-year quarter.
The company repurchased 0.6 million shares of its common stock for $75 million during the quarter at an average price of $115.91. From Apr 1 through May 1, the company repurchased an additional 0.2 million of shares for $22 million.
Revenues are now expected in the range of $5.195-$5.335 billion, reflecting an increase of 4-7% (compared with the previously guided range of $5.26-$5.40 billion, showing an increase of 4-6%). The change from the previously guided range is due to the impact of the new revenue recognition standard that the company adopted.
Adjusted net income from continuing operations is expected within $702-$717 million, reflecting a year-over-year increase of 25-28%, down from the previously guided $702-$722 million range. The company expects Adjusted EBITDA between $1.330 billion and $1.355 billion, reflecting year-over-year growth of 7-9%.
Adjusted EPS from continuing operations is anticipated in the range of $6.96-$7.11 and is projected to increase 28-31% on a share count of 100.8 million. This compares favorably with the previously guided range of $6.90-$7.05, with projected growth of 25-28% year over year.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month. There has been one revision higher for the current quarter compared to one lower.
Wyndham Worldwide Corp Price and Consensus
At this time, WYN has a subpar Growth Score of D, however its Momentum is doing a lot better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for momentum investors than value investors.
WYN has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.