Enjoy Your Stay With Wyndham

11/21/2011


  Recent Price
$35
  Dividend
$0.60
  Yield
1.7%
  P/E Ratio
13
  Shares (millions)
162
  52-Week Price Range
$36.00 - $24.76

With more than 7,200 hotel properties scattered across six continents, Wyndham Worldwide ($35; WYN) is the world's largest hotel company as measured by the number of properties. The company also operates a global network that allows customers to rent, buy, or exchange timeshares.

By fluffing customers' pillows, Wyndham is filling its pockets. Sales rose 12% in the first nine months of 2011, and operating profit margins expanded in all three quarters, resulting in a 63% jump in cash provided by operations. Management is aggressively returning excess cash to shareholders. Wyndham is a Buy and a Long-Term Buy.

Business breakdown

The vacation-ownership unit (48% of revenue in nine months ended September, 43% of operating income) delivered 5% higher sales in the first nine months of 2011. These units, best known as timeshares, are ownership interests in vacation property.

Wyndham also represents independent owners. In this $60 billion global industry, vacationers rent furnished properties, such as cottages, condos, and yachts. The owners can also exchange interest in their vacation homes for time at other properties. The vacation exchange and rentals business (35%, 38%) has increased revenue 26% so far this year.

Wyndham's lodging segment (17%, 18%) has produced 7% sales growth this year, helped by expansion abroad and higher revenue per available room in the U.S. Over the past 20 years, Wyndham has assembled a broad collection of hotel brands, including Wyndham Hotels, Ramada, Days Inn, Super 8, and Howard Johnson. Roughly 88% of the unit's revenue comes from franchising activities, providing a recurring revenue stream and low cost structure.

Occupancy rates for the U.S. lodging industry are improving, helped by a rebound in business travel and a dearth of new construction. Still, occupancy has not returned to prerecession levels.

Looking ahead

For 2012, management envisions moderate U.S. economic growth, continued difficulties in Europe, and higher growth in developing markets. Against that backdrop, Wyndham anticipates per-share profits of $2.72 to $2.82, implying growth of 10% to 14%. The consensus 2012 profit estimate of $2.87 per share reflects Wall Street's confidence in Wyndham; the company has topped market expectations by more than 4% in each of the last four quarters. Wyndham trades at 12 times that 2012 estimate, 34% below the P/E ratio of the median hospitality company in the S&P 1500 Index. The stock also trades at a discount to its peers based on price/sales and price/operating cash flow.

The dividend rose 25% in February, and management expects the payout to keep increasing by at least the rate of its earnings growth. Wyndham also slashed its share count by 11% in the first nine months of 2011. With $553 million left on its share-buyback program, Wyndham could reduce shares by another 10% at current prices.

An annual report for Wyndham Worldwide Corp. is available at 22 Sylvan Way, Parsippany, NJ 07054; (973) 753-6000; www.wyndhamworldwide.com.

WYNDHAM WORLDWIDE
Quarter
Per-Share Earnings*
($)
Sales
Change
Quarterly
Price Range
($)
P/E Ratio
Range
Sep '11
1.08
vs.
0.68
+ 14%
36.00
-
24.76
16 - 11
Jun '11
0.67
vs.
0.51
+ 13%
35.50
-
30.39
17 - 15
Mar '11
0.41
vs.
0.34
+ 7%
32.36
-
28.05
16 - 14
Dec '10
0.46
vs.
0.40
+ 3%
31.41
-
27.09
16 - 14
           
Year
(Dec.)
Sales
 ($Bil.)
Per-Share
Earnings*
($)
Per-Share
Dividend
($)
52-Week
Price Range
($)
P/E Ratio
Range
2010
3.85
2.00
0.48
31.41
-
19.44
16 - 10
2009
3.75
1.80
0.16
21.45
-
2.77
12 - 2
2008
4.28
2.08
0.16
25.00
-
2.55
12 - 1
2007
4.39
2.14
0.08
39.40
-
23.28
18 - 11
 
Quadrix Scores †
Overall
Momen-
tum
Value
Quality
Financial
Strength
Earnings
Estimates
Performance
93
86
65
73
58
84
81

   * Earnings exclude special items.
   † Quadrix® scores are percentile ranks, with 100 the best.


Current Hotline

Stock Spotlight

Individual Stock Reports

ISRs make stock research easy!

Perhaps the most valuable two page reports available anywhere.

All the data you would normally have to plow through years of 10-K filings, earnings reports, and reams of market data to assemble — yours all in one concise report.

ISRs contain our proprietary Quadrix scores — find out how we rate all the stocks in the S&P 500.

Visit us at individualstockreports.com