Thursday, October 29, 2009

Wyndham Worldwide (WYN) Beats, Raises Guidance

Wyndham Worldwide (WYN) reported Tuesday evening, we did not have time to discuss it yesterday due many other activities happening.  This hotel chain continues to be one of our best performers of the year and as I say in almost every update on the name ... it is STILL cheap.  As I'm looking at the chart now the action the past 48 hours allowed the stock to fill a gap, and I'm smacking myself in the head because I completely missed an opportunity to add.  Unlike many other names, the stock was able to fill a gap but stay over key moving averages...

A closer look at earnings:
  • Wyndham Worldwide Corp (WYN), which franchises more than 7,000 hotels, raised its 2009 earnings forecast on a brightening economy and said it was looking for opportunities to add more brands to its stable of hotels.
  • The company boosted its full-year EBITDA outlook by about 2 percent and forecast 2009 revenue and fourth-quarter results above analysts' estimates.
  • Wyndham also reported better-than-expected third-quarter profit.  (the company) reported third-quarter net income of $104 million, or 57 cents per share, down from $142 million, or 80 cents per share, a year earlier.  Excluding one-time items, it earned 58 cents per share. Analysts, on average, had expected 56 cents, according to Thomson Reuters I/B/E/S.
  • Revenue fell 17 percent to $1.02 billion, while expenses fell 18 percent.
  • Wyndham, which operates the Days Inn and Ramada hotels, said revenue per available room slumped 17 percent in the third quarter. (definitely a negative, but more than represented in the cheap stock price)
  • For the fourth quarter, it now expects earnings of 35 cents to 38 cents a share, above analysts' average estimate of 32 cents.
  • It expects full-year earnings before interest, taxation, depreciation and amortization (EBITDA) of $775 million to $825 million, up from a previous forecast of $760 million to $810 million. Analysts, on average, expect $782.12 million.
  • The company forecast 2009 revenue of $3.5 billion to $3.9 billion, compared with analysts' average estimate of $3.6 billion.
Still conservative on next year... Analysts actually show 2010 at $1.48 versus 2009's $1.77 so even being flat would be upside to analysts:
  • The company said 2010 earnings should be roughly in line with 2009 results

  • Mid-scale and economy hotel chains, like the ones Wyndham operates, have held up better than their luxury counterparts amid the downturn. But Holmes was cautious about calling a bottom.  "We can't call it a real uptick yet," he said in an interview with Reuters. "Obviously we're still seeing RevPAR (revenue per available room) declines."
  • Chief Executive Stephen Holmes said the company is looking to invest in its hotel group and said Wyndham could acquire more brands and add rooms, given current plentiful opportunities to buy distressed properties.  "We do believe there will be a significant restructuring of the lodging industry over the next 12 to 18 months," he said during a conference call with analysts. 
Zachs has a nice overview of the numbers here.


CEO Interview on CNBC yesterday
  • Wyndham Worldwide CEO Stephen P. Holmes is seeing stabilization in the travel industry and is transforming the firm to a fee-for-service business model to embrace the rebound, the executive told CNBC Wednesday.  Currently the company operates three major businesses — hotel, rental, and ownership exchange. 
  • Holmes says business travel is still not out of the woods. He sees a reduced amount in business traveling and the places workers travel. Leisure travel shows more sign of stabilization.
  • “The decline in occupancy is basically stabilized. You really need to see occupancy stabilization before you see rents go up.” Holmes said. “The rooms have to be filled before the hotel owner has the courage to raise the price.”

[Sep 29, 2009: Wyndham Worldwide and Sector Upgraded by Goldman Sachs]
[Jul 29, 2009: Wyndham Worldwide Solid: RevPAR Far Above Industry]
[May 1, 2009: Bookkeeping - Creating New Position in Wyndham Worldwide]
[May 1, 2009: A Stroll Through the Hotel Space]

Long Wyndham Worldwide in fund; no personal position

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