This Hospitality Company May Pose Good Opportunities To Investors

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One of the world's largest hospitality companies, Wyndham Worldwide (WYN, Financial) provides a wide range of hospitality products and services through its global portfolio of world-renowned brands. Wyndham Hotel Group is the world's largest and most diverse hotel company with approximately 7,500 hotels worldwide.

As the world's largest developer and marketer of flexible, points-based vacation ownership products, Wyndham Vacation Ownership has developed or acquired more than 185 vacation ownership resorts throughout the United States, Canada, Mexico, the Caribbean and the South Pacific that represent more than 23,000 individual vacation ownership units.

Fourth-quarter earnings

  • Fourth quarter adjusted diluted earnings per share (EPS) was $0.90, an increase of 23% from adjusted diluted EPS of $0.73 in the fourth quarter of 2013. Reported diluted EPS was $0.65 in the fourth quarter of 2014, unchanged from the same period in 2013.
  • Full-year adjusted diluted EPS was $4.53, an increase of 18% from adjusted diluted EPS of $3.83 for the prior year period. Reported diluted EPS was $4.18 compared to $3.21 for the prior year period.
  • During the quarter, the company repurchased 2.1 million shares of its common stock for $171 million. For the full year, the company spent $652 million to repurchase 8.6 million shares of its common stock.
  • The company's board of directors authorized an increase in the quarterly cash dividend to $0.42 from $0.35 per share, beginning with the dividend that is expected to be declared in the first quarter of 2015.
  • The company increased its annual free cash flow target to $800 million from $750 million beginning in 2015.

"A strong fourth quarter led to 18% growth in full-year adjusted EPS, capping another year of double-digit earnings growth," said Stephen P. Holmes, chairman and CEO. "All three of our businesses performed well, and we're enthusiastic about the opportunities and initiatives that will drive growth going forward. As an indication of confidence in our prospects, the board of directors approved a 20% increase in our quarterly dividend."

Fourth quarter 2014 operating results

Fourth quarter revenues were $1.2 billion, an increase of 3% from the prior year period, or 4% in constant currency. The increase reflects growth in all of the company's business segments.

Adjusted net income was $112 million, or $0.90 per diluted share, compared with $96 million, or $0.73 per diluted share for the same period in 2013. The increases reflect stronger operating results in the company's lodging and vacation exchange and rentals businesses and lower net interest expense. EPS also benefited from the company's share repurchase program, which decreased weighted average diluted share count by 5% year over year.

Reported net income for the fourth quarter of 2014 was $81 million, or $0.65 per diluted share, compared with $86 million, or $0.65 per diluted share, for the fourth quarter of 2013. Reported net income in both periods reflects several items excluded from adjusted net income. The net result of these items unfavorably impacted fourth quarter 2014 net income by $31 million and unfavorably impacted fourth quarter 2013 net income by $10 million. Full reconciliations of adjusted results to GAAP results appear in Table 8 of this press release.

Full year 2014 operating results

Revenues for full-year 2014 were $5.3 billion, an increase of 5% over the prior year period. Adjusted net income for the full-year 2014 was $573 million, or $4.53 per diluted share, compared with $515 million, or $3.83 per diluted share, for the prior year. The increases reflect stronger operating results across all of the company's businesses. EPS also benefited from the company's share repurchase program, which decreased weighted average diluted share count by 6% compared with 2013.

Reported net income for full-year 2014 was $529 million, or $4.18 per diluted share, compared with reported net income of $432 million, or $3.21 per diluted share, for the prior year period. Reported net income reflects several items excluded from adjusted net income. The net result of these items unfavorably impacted full year 2014 net income by $44 million and unfavorably impacted full year 2013 net income by $83 million. Full reconciliations of adjusted results to GAAP results appear in Table 8 of this press release.

Full-year 2014 cash flow

Free cash flow was $749 million for the year ended December 31, 2014, compared with $770 million for the same period in 2013. The company defines free cash flow as net cash provided by operating activities less capital expenditures. For the year ended December 31, 2014, net cash provided by operating activities was $984 million, compared with $1,008 million in the prior year period.

Business unit results

Lodging (Wyndham Hotel Group)

Revenues were $267 million in the fourth quarter of 2014, a 9% increase over the fourth quarter of 2013.

Domestic RevPAR increased 8.6%, partially offset by a 7.8% decline in international RevPAR, resulting in a 3.0% increase in total systemwide RevPAR compared with the fourth quarter of 2013. In constant currency, total systemwide RevPAR increased 5.0%.

Adjusted EBITDA for the fourth quarter of 2014 was $79 million, a 23% increase compared with the fourth quarter of 2013. The increase primarily reflects higher RevPAR and the favorable timing of loyalty and marketing expenses compared with the same period last year.

As of December 31, 2014, the company's hotel system consisted of approximately 7,650 properties and approximately 661,000 rooms, a 2.4% room increase compared with the fourth quarter of 2013. The development pipeline included approximately 960 hotels and 117,000 rooms, of which 57% were international and 64% were new construction.

Vacation Exchange and Rentals (Wyndham Exchange & Rentals)

Revenues were $311 million in the fourth quarter of 2014, a 2% increase over the fourth quarter of 2013. In constant currency, revenues were up 6%.

Exchange revenues were $150 million, flat compared with the fourth quarter of 2013. In constant currency, exchange revenues increased 2%, as the average number of members increased 2.2% and exchange revenue per member was flat.

Vacation rental revenues were $144 million, a 4% increase over the fourth quarter of 2013. In constant currency, vacation rental revenues were up 11%, reflecting a 7.3% increase in transaction volume and a 3.3% increase in the average net price per vacation rental.

Adjusted EBITDA for the fourth quarter of 2014 was $39 million, an 8% increase compared with the fourth quarter of 2013. On a currency-neutral basis, adjusted EBITDA increased 14% compared with the prior year period due to the revenue increases and cost controls.

Vacation Ownership (Wyndham Vacation Ownership)

Revenues were $668 million in the fourth quarter of 2014, a 2% increase over the fourth quarter of 2013, primarily reflecting higher resort management fees.

Gross VOI sales were $470 million in the fourth quarter of 2014, a decrease of 4% compared with the fourth quarter of 2013, reflecting a 1.4% decline in volume per guest and a 2.1% decline in tour flow.

Net VOI sales were flat compared with the fourth quarter of 2013, reflecting a lower provision for loan loss resulting from improved portfolio performance.

EBITDA for the fourth quarter of 2014 was $172 million, flat compared with the fourth quarter of 2013.

Other items

  • The company repurchased 2.1 million shares of common stock for $171 million during the fourth quarter of 2014. For the full-year 2014, the company purchased 8.6 million shares of common stock for $652 million. From January 1 through February 9, 2015, the company repurchased an additional 0.8 million shares for $68 million. The company's remaining share repurchase authorization totals $948 million as of February 9, 2015.
  • Reported net interest expense in the fourth quarter of 2014 was $25 million, compared with $32 million in the fourth quarter of 2013, primarily reflecting the benefit of lower interest rates associated with fixed-for-floating interest rate swaps.

For the full year 2015, the Company provides the following guidance:

  • Revenues of approximately $5.450 - $5.550 billion from $5.400 - $5.500 billion.
  • Adjusted EBITDA of approximately $1.285 - $1.315 billion from $1.300 - $1.330 billion, reflecting the adverse impact of foreign exchange partially offset by stronger underlying performance. Based on January 31, 2015 rates, foreign exchange movements have had a $25 million adverse effect on 2015 EBITDA guidance since the company's initial 2015 guidance, which was issued on October 24, 2014. The company's 2015 guidance reflects a $34 million adverse impact from foreign exchange compared with 2014 full-year results.
  • Adjusted EPS of approximately $4.75 - $4.90 based on a diluted share count of 123 million from $4.70 - $4.85 based on a diluted share count of 125 million.
  • Fourth quarter adjusted diluted earnings per share (EPS) was $0.90, an increase of 23% from adjusted diluted EPS of $0.73 in the fourth quarter of 2013. Reported diluted EPS was $0.65 in the fourth quarter of 2014, unchanged from the same period in 2013.
  • Full year adjusted diluted EPS was $4.53, an increase of 18% from adjusted diluted EPS of $3.83 for the prior year period. Reported diluted EPS was $4.18 compared to $3.21 for the prior year period.
  • During the quarter, the company repurchased 2.1 million shares of its common stock for $171 million. For the full year, the company spent $652 million to repurchase 8.6 million shares of its common stock.
  • The company's board of directors authorized an increase in the quarterly cash dividend to $0.42 from $0.35 per share, beginning with the dividend that is expected to be declared in the first quarter of 2015.
  • The company increased its annual free cash flow target to $800 million from $750 million beginning in 2015.

"A strong fourth quarter led to 18% growth in full-year adjusted EPS, capping another year of double-digit earnings growth," said Stephen P. Holmes, chairman and CEO. "All three of our businesses performed well and we're enthusiastic about the opportunities and initiatives that will drive growth going forward. As an indication of confidence in our prospects, the board of directors approved a 20% increase in our quarterly dividend."

To end

With highly recognizable brands and hotel choices in every category from upper-scale to economy, WYN offers not only the most lodging choices around the world but also exceptional customer service and great value. WYN provides access to over 107,000 vacation properties in more than 100 countries. Based in Parsippany, N.J., Wyndham Worldwide employs over 34,000 associates globally.

WYN has been recognized as one of the world's most ethical companies by Ethisphere Institute, an independent research center promoting best practices in corporate ethics and governance. This is the third time the company has received the prestigious designation since Ethisphere first began recognizing companies in 2007.

With modest fourth quarter results, the company is poised to grow further and is expected to create shareholder returns. Investors may consider adding this company to their portfolio.

(Source: Company’s Website)