Wyndham Worldwide Corp. said Thursday that its second-quarter earnings gained 2 percent, beating Wall Street's profit expectations, although its revenue missed forecasts and the company cut its full-year guidance.
Investors responded by boosting Wyndham shares 46 cents, or 2.6 percent, to $17.94 on Thursday. During the past 52 weeks, the stock has fallen from a high of $36 last August to touch a low of $14.62 in mid-July.
Earnings rose to $98 million, or 55 cents per share, from $96 million, or 52 cents per share, a year ago. Excluding some items related to its 2006 spin-off from Cendant Corp., earnings totaled $94 million, or 53 cents per share, compared with $89 million, or 49 cents per share in the prior-year period.
The Parsippany, New Jersey-based company's revenue rose 3 percent to $1.13 billion, from $1.1 billion in the second quarter of 2007.
Analysts surveyed by Thomson Financial forecast adjusted earnings of 47 cents per share on higher revenue of $1.18 billion.
In the hotel group, revenue per available room, or revpar, grew 1.4 percent as a surge in international growth offset a 3.7 percent drop in domestic results. Revpar, a key gauge of a hospitality company's performance, has suffered throughout the hotel industry as gas prices have surged, airlines reduced capacity and consumers cut back on spending.
Susquehanna Financial Group analyst Robert LaFleur said Wyndham's results highlighted the "diversity and stability" of its business model.
"As a franchisor in the hotel business, they're just not as affected by softer occupancy rates than hotel owners would be," LaFleur said.
Hotel franchisors like Wyndham make money when they add to the number of hotels in their system and when those hotels increase revenue. Although Wyndham's revpar growth is slowing, LaFleur said unit growth has remained solid.
In the company's vacation timeshare business, sales rose 2 percent to $532 million, although revenues dipped 1 percent to $621 million due to a higher loan loss reserve. The company's management also noted that some timeshare income was accelerated into the second-quarter from the fourth-quarter due to shifts in construction timing and other factors.
In a conference call with investors, Chairman and Chief Executive Stephen Holmes said timeshare interest is "holding up well," especially considering tighter consumer spending. He noted, however, that the Hawaii and Las Vegas markets were more challenging, with sales to new customers falling in both locations.
"We do see a little bit of softness in tour flow in Hawaii _ actually Las Vegas tour flow was up a little bit. So it really wasn't a question of demand, it's a question of how many we can close," Holmes said.
LaFleur noted that the Hawaii and Las Vegas markets represent less than 20 percent of Wyndham's total sales.
Deutsche Bank analyst Chris Woronka called the company's timeshare performance "surprisingly strong." He noted, however, that the company plans to reduce timeshare spending and called it a prudent move. Woronka also characterized the company's outlook reduction as "fairly modest" compared with some investors' fears.
In the vacation exchange and rentals group, revenue grew 9 percent to $314 million.
Wyndham reduced its full-year earnings outlook to a range of $2.18 to $2.32 per share. The company lowered its 2008 revenue guidance to $4.53 billion to $4.63 billion. The company now says it expects worldwide revpar to be flat to down 2 percent. Its previous forecast was for growth of 3 percent to 5 percent.
The company previously expected earnings per share between $2.23 and $2.38 for the year and 2008 revenue of $4.8 billion to $4.9 billion.
Analysts forecast 2008 earnings of $2.22 on revenue of $4.76 billion.
For the third quarter, Wyndham predicts earnings per share in a range of 80 cents to 82 cents. Analysts expect third-quarter earnings of 80 cents per share.
As of June 30, Wyndham's hotel system included about 6,560 properties, of which 20 percent were international. The company's development pipeline totaled roughly 930 hotels, of which more than 40 percent were outside the U.S.
