Wyndham Beats, Forecasts In Line

Wyndham Worldwide posts better-than-expected third-quarter results, and forecasts earnings in line with analysts' consensus call.
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(Updated with additional information and analyst commentary.)



) --

Wyndham Worldwide


shares traded lower on Tuesday despite the hotel and timeshare operator's posting of better-than-expected quarterly earnings.

Wyndham said its improved quarterly report was buoyed by a recovering economy and tighter cost controls. That led the company to raise its outlook for 2010.

"This was a solid beat, driven by better fundamentals in the timeshare business," noted Hudson Securities analyst Robert LaFleur. "The guidance raise is encouraging and the preliminary 2011 outlook is above the Street."

The analyst added that "the upside was largely driven by the vacation ownership segment" and that earnings in that segment beat his estimate by more than $20 million.

Lodging revenue of $203 million was $6 million above LaFleur's estimates while sales totaling $553 million from Wyndham's vacation ownership segment beat by $3 million. Vacation exchange and rental revenue of $330 came in $12 million below the analyst's expectations.

Wyndham's timeshare business contributes around half its annual revenue. Its vacation exchange and rentals business makes up 31%, and lodging accounts for the other nearly 20%.

RevPar, or revenue per available room -- a closely watched metric in the hotel industry -- increased 6.7% in the quarter, above expectations, though LaFleur noted that unit growth "was a little on the light side."

LaFleur told


ahead of Wyndham's report that investors should pay attention to Wyndham's free cash flow generation, and what the company plans to do with those available funds. He estimated Wyndham would deploy its free cash flow across a combination of growth-oriented acquisitions, dividend payments and share buybacks.

In a note to investors published Tuesday morning he commented that Wyndham generated $564 million in free cash flow so far this year, and is well on track to meet its goal of as much as $700 million in FCF for the calendar year.

"WYN remains disciplined deploying this cash as they've said they would," he noted. "They acquired ResortQuest this quarter and bought back $128 million of their shares."

In late September

Wyndham announced it would acquire


for $56 million. ResortQuest is a vacation rental hospitality and resort real estate company that manages vacation condominiums and home rentals in the U.S.

Wyndham now expects fourth quarter earnings in a range between 40 and 44 cents per share. Analysts' consensus call is for EPS of 40 cents.

The franchisor of hotel chains such as Super 8 and Days Inn said 2011 earnings before interest, taxes, depreciation and amortization should be in a range of $925 million to $955 million, higher than the consensus estimate for earnings of $914 million.

Wyndham booked third quarter net income of $156 million, or 84 cents per share, compared with year-earlier earnings of $104 million, or 57 cents per share. Adjusted for one-time items, earnings were 68 cents per share.

Results topped analysts' consensus call for a profit of $118 million, or 63 cent cents per share. Analysts typically exclude one-time items when forecasting their earnings estimates.

Marriott International

(MAR) - Get Report

, which spun off from

Host Hotels & Resorts

(HST) - Get Report

in 1993, said earlier this month it swung to a third-quarter profit, boosted by stronger corporate and leisure travel demand. Net income came in at $83 million, or 22 cents per share, compared with a year-earlier loss of $466 million, or $1.31 per share. Revenue increased to $2.65 billion, from $2.47 billion.

Marriott's results met expectations.

Host, a lodging

real estate investment trust, narrowed its quarterly losses, grew revenue by 11.4% and revPAR by 8.8% thanks to higher average daily rates and an increase in occupancy.

Starwood Hotels & Resorts


, due to report quarterly results on Thursday, is LaFleur's top pick in the lodging sector, with a buy rating and $61 price target.

"Starwood is very well positioned in this recovery because they have a significant portfolio of owned assets which benefit disproportionately in an early stage recovery," he said.

Wyndham shares traded down 1.6% on Tuesday. Shares of Starwood appreciated 1.4% while Marriott gained 1.1%. Host ticked 0.2% lower.

-- Written by Miriam Marcus Reimer in New York.

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