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Hotel franchising company Wyndham (NYSE:WH) missed analysts' expectations in Q2 CY2024, with revenue up 1.4% year on year to $367 million. It made a non-GAAP profit of $1.13 per share, improving from its profit of $0.93 per share in the same quarter last year.
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Wyndham (WH) Q2 CY2024 Highlights:
- Revenue: $367 million vs analyst estimates of $370.5 million (small miss)
- EPS (non-GAAP): $1.13 vs analyst estimates of $1.04 (9.1% beat)
- Gross Margin (GAAP): 57.8%, up from 55.8% in the same quarter last year
- Free Cash Flow of $27 million, down 59.7% from the previous quarter
- RevPAR: $45.99 at quarter end, down 1% year on year
- Market Capitalization: $5.97 billion
Established in 1981, Wyndham (NYSE:WH) is a global hotel franchising company with over 9,000 hotels across nearly 95 countries on six continents.
Hotels, Resorts and Cruise LinesHotels, resorts, and cruise line companies often sell experiences rather than tangible products, and in the last decade-plus, consumers have slowly shifted from buying "things" (wasteful) to buying "experiences" (memorable). In addition, the internet has introduced new ways of approaching leisure and lodging such as booking homes and longer-term accommodations. Traditional hotel, resorts, and cruise line companies must innovate to stay relevant in a market rife with innovation.
Sales GrowthA company’s long-term performance can indicate its business quality. Any business can put up a good quarter or two, but many enduring ones tend to grow for years. Wyndham's demand was weak over the last five years as its sales fell by 8.1% annually, a rough starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new property or emerging trend. Wyndham's annualized revenue declines of 7% over the last two years suggest its demand continued shrinking.
Wyndham also reports revenue per available room, which clocked in at $45.99 this quarter and is a key metric accounting for daily rates and occupancy levels. Over the last two years, Wyndham's revenue per room averaged 3.4% year-on-year growth. Because this number is better than its revenue growth, we can see its room bookings outperformed its sales from other areas like restaurants, bars, and amenities.
This quarter, Wyndham's revenue grew 1.4% year on year to $367 million, falling short of Wall Street's estimates. Looking ahead, Wall Street expects sales to grow 5.7% over the next 12 months, an acceleration from this quarter.
Cash Is King Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can't use accounting profits to pay the bills.
Wyndham has shown robust cash profitability, giving it an edge over its competitors and the ability to reinvest or return capital to investors. The company's free cash flow margin averaged 20.2% over the last two years, quite impressive for a consumer discretionary business.
Wyndham's free cash flow clocked in at $27 million in Q2, equivalent to a 7.4% margin. The company's margin regressed as it was 13.1 percentage points lower than in the same quarter last year, but we wouldn't read too much into it because working capital and capital expenditure needs can be seasonal, leading to quarter-to-quarter swings. Long-term trends carry greater meaning.
Key Takeaways from Wyndham's Q2 Results It was good to see Wyndham beat analysts' EPS expectations this quarter, though its revenue slightly missed. Zooming out, we think this was still a decent, albeit mixed, quarter, showing the company is staying on track. The stock traded up 2% to $71.91 immediately following the results.
