Wyndham (WYN) Q1 Earnings Beat Estimates, '18 EPS View Up

Wyndham Worldwide Corporation (NYSE:WYN) 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 Worldwide Corp Price, Consensus and EPS Surprise

Wyndham Worldwide Corp Price, Consensus and EPS Surprise | Wyndham Worldwide Corp Quote

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.

Shares of the company have rallied 5.6% in the last six months, slightly outperforming the industry’s gain of 4.7%.

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.

Operating Highlights

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.

Balance Sheet

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.

2018 Guidance

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.

Zacks Rank & Other Releases

Wyndham carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Wynn Resorts (NASDAQ:WYNN) posted impressive results in first-quarter 2018, wherein both earnings and revenues surpassed the Zacks Consensus Estimate. Adjusted earnings of $2.30 per share increased 79.7% on a year-over-year basis. This improvement can be attributed to substantial rise in operating income from Macau operations (Wynn Palace and Wynn Macau), and income tax benefit from the U.S. tax reform, partially offset by a decrease in Redemption Note fair value.

MGM Resorts (NYSE:MGM) reported adjusted earnings of 34 cents in the first quarter of 2018. The Zacks Consensus Estimate was pegged at earnings of 31 cents. The company had reported earnings of 36 cents in the prior-year quarter.

Hilton (NYSE:HLT) reported better-than-expected earnings for the sixth straight quarter, on posting first-quarter 2018 results. Adjusted earnings per share came in at 55 cents, outpacing the consensus mark of 51 cents and improving 44.7% on year-over-year basis.

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