Wyndham Worldwide Corp. (WYN) recorded second-quarter 2010 earnings of $95 million or 51 cents per share, which was well ahead of the Zacks Consensus Estimate of 41 cents and the company’s previous guidance of 38 cents to 42 cents. The increment was driven by better-than-expected business in Exchange and Rentals, along with a lower effective tax rate and the favorable net effect of foreign currency. In the year-earlier quarter, Wyndham earned $75 million or 41 cents per share on an adjusted basis.
The revenues spiked 5% year-over-year to $963 million in the quarter under review reflecting the sales momentum in each of Wyndham’s three business units. Revenues also outpaced the Zacks Consensus Estimate of $937 million.
Segment Performance
Lodging: The segment’s revenue upped 2% year-over-year to $178 million. Increased royalty, marketing and reservation revenues primarily from room growth led to the rise.
In constant currency, second-quarter 2010 system-wide RevPAR (revenue per available room) fell 1.2% year-over-year while including the impact of foreign currency, system-wide RevPAR remained flat.
Vacation Exchange and Rentals: The segment’s revenue of $281 million was almost in line with the prior-year period. In constant currency terms, revenues rose 3%.
Vacation Ownership: The segment’s revenues climbed 8.1% from the prior-year period to $505 million while sales from Gross Vacation Ownership Interest surged 13% to $371 million owing to a 16% increase in volume per guest in a backdrop of relatively flat tour flow.
Room Update
At the end of second quarter, Wyndham’s hotel system comprised approximately 7,160 properties and 606,800 rooms, of which 24% were international. Its development pipeline added up to approximately 980 hotels and 107,600 rooms, of which 54% were newly constructed and 49% were international.
At June end, Wyndham Hotel Group acquired the Tryp hotel brand from Sol Melia Hotels & Resorts including franchise agreements with 92 TRYP hotels or 13,200 rooms in Europe and South America.
Outlook
Wyndham has raised its full-year 2010 guidance. The company expects adjusted earnings to range from $1.78–$1.88 per share compared with its prior guidance of $1.56–$1.71. For the third quarter of 2010, Wyndham expects adjusted earnings per share to be in the range of 60 cents to 64 cents.
For full-year 2010, management raised its revenue guidance range to $3.7 billion–$4.0 billion from its prior guidance range of $3.6 billion–$3.9 billion. Adjusted EBITDA is expected to remain in the range of $825 million–$860 million compared with the prior projection of $805 million–$840 million.
Financials
Wyndham ended the second quarter with cash and cash equivalents of approximately $240 million, compared with $155 million as of Dec 31, 2009. The company’s long-term debt was $1,763 million versus $1.840 million as of Dec 31, 2009. During the quarter, Wyndham increased its ongoing share repurchase program by $300 million.
Our Take
We remain optimistic on the company based on its improving fundamental growth prospects and acquisition as well as worldwide expansion strategy. Although headwinds in the lodging sector have subsided and the industry is witnessing a gradual recovery, the industry is yet to come out of the woods given several factors including high unemployment, limited finance availability and low consumer confidence. Hence, we currently have a short-term Zacks #3 Rank (Hold) rating on the stock.
Wyndham’s close competitors Marriott International Inc. (MAR) and Starwood Hotels & Resorts Worldwide Inc. (HOT) reported their second-quarter earnings on July 14 and July 22, respectively. Marriott’s second-quarter 2010 earnings of 31 cents per share were ahead of the Zacks Consensus Estimate of 28 cents. Even Starwood’s second-quarter earnings of 35 cents topped the Zacks Consensus Estimate by 10 cents.
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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