“Wyndham Worldwide, one of the best performers in the S&P today, their fourth quarter earnings better than expected and tripled their dividend to twelve cents from just four.” — CNBC’s Squawk on the Street 2/10/2010
Wyndham Worldwide (WYN), which operates such hotel chains as Days Inn and Ramada Inn, swung to a better than expected profit after massive write-downs in the quarter a year ago. A year ago, Wyndham reported a loss of $1.36 billion or $7.63 per share after taking one-time charges of $8.10 per share. Since that time, stabilization in the hospitality industry enabled the company to earn $70 million in the quarter, which comes out to $.40 per share on revenue of $911 million. Wall Street analysts had expected the company to earn $.37 on sales of $856 million.
For the full year, Wyndham was able to earn $327 million or $1.80 per share, when taking out 19 cents per share in one-time items. However, for comparison purposes when excluding the massive charge downs of fiscal 2008, the company would have earned $2.18 per share that year. Furthermore, revenue fell 12% from the results a year ago, and average revenue per available room dropped 13.3% after adjusting for currency fluctuations. Clearly, business is slower than the company would like, but they were pleased to announce an uptick of about 3% in vacation ownership revenue and vacation rental revenue.
The good news is that Wyndham is confident enough in their financial strength to triple the dividend from 4 cents per quarter to 12 cents per quarter. In addition, the company announced that they are resuming their share repurchase plan which still has $157 million available. For the year ahead, the company expects revenue to stay relatively flat with this year, which is slightly better than analysts expected. WYN did give estimates of EBITDA of $775-$825 million, which is in line with consensus estimates of $796 million.
We currently have a Fairly Valued rating on WYN, which we have had since we initiated coverage in October. On the bright side, the company can put that huge one-time write down officially behind them as it is no longer part of their TTM reported earnings, but we are still seeing fundamentals such as earnings and revenues suffering from general softness in the industry. We will need to see these trends reverse or a significant price decline before we become more positive on this stock. Wyndham is trading higher on the news, which is probably more related to the dividend raise than the better than expected (yet still unimpressive) financial results.