With a $6.29 billion market cap, Wyndham Hotels & Resorts, Inc. (WH) operates as a hotel franchisor worldwide. The company operates through two segments: Hotel Franchising and Hotel Management.
The Hotel Franchising segment licenses its lodging brands and offers related services to third-party hotel owners. The Hotel Management segment provides hotel management services for full-service and limited-service hotels.
On June 2, WH opened the first La Quinta and Hawthorn Suites dual-branded hotel concept in Pflugerville, Texas. This brand new pairing contributed to 48 hotels in the company’s record-setting development pipeline of more than 1,500 hotels.
"Pairing our leading upper-midscale La Quinta brand with our benchmark extended-stay Hawthorn Suites brand offers expanded options for travelers and supports developers with operational advantages. Opening in Pflugerville is particularly exciting, as the suburb is one that has seen significant business and residential growth in recent years,” said Krishna Paliwal, WH’s President of La Quinta and Hawthorn Suites.
However, WH’s shares have declined 24.7% year-to-to-date and 6.4% over the last year to close the previous trading session at $67.48. It is currently trading 28.1% below its 52-week high of $93.86, which it hit on April 21, 2022. And Wall Street analysts see significant upside potential in the stock.
Of the five Wall Street analysts that rated WH, four rated it Buy, while one rated it Hold. The 12-month median price target of $95.20 indicates a 41.1% potential upside from the last closing price. The price targets range from a low of $77.00 to a high of $106.00.
Here is what could influence the performance of WH in the upcoming months:
Robust Financials
WH's net revenues increased 22.4% year-over-year to $371 million in the fiscal 2022 first quarter ended March 31, 2022. The company’s operating income amounted to $160 million, up 153% year-over-year. Its adjusted EBITDA grew 63.9% year-over-year to $159 million.
Furthermore, the company’s adjusted net income and adjusted earnings per share came in at $88 million and $0.95, registering increases of 166.7% and 163.9%, respectively, from the prior-year period.
Favorable Analyst Estimates
Analysts expect WH's EPS for the fiscal year 2022 (ending December 2022) to come in at $3.56, representing a rise of 12.7% from the previous year. The company has an impressive earnings history as it has surpassed the consensus EPS estimates in each of the trailing four quarters. Also, Street expects the company's EPS to grow 80.5% per annum over the next five years.
For fiscal 2023 (ending December 2023), the $1.50 billion consensus revenue estimate represents a 3.9% improvement year-over-year.
High Profitability
In terms of trailing-12-month gross profit margin, WH’s 71.63% is 97.6% higher than the industry average of 36.25%. Likewise, its trailing-12-month net income margin of 24.53% is 283.61% higher than the industry average of 6.39%. Moreover, the stock’s trailing-12-month ROCE and ROTA of 30.33% and 7.60% compare with the industry averages of 17.02% and 5.54%, respectively.
POWR Ratings Show Promise
WH has an overall B rating, equating to a Buy in our POWR Ratings system. The POWR Ratings are calculated by accounting for 118 distinct factors, with each factor weighted to an optimal degree.
WH has a grade of A for Sentiment, consistent with its revenue and earnings growth estimates. In addition, the stock has a B grade for Quality, which is in sync with its higher-than-industry profitability ratios.
WH is ranked #6 out of 22 stocks in the Travel - Hotels/Resorts industry.
Beyond what I have stated above, we have also given WH grades for Growth, Momentum, Value, and Stability. Get access to all the WH ratings here.
Bottom Line
WH reported solid financial results in its last reported quarter. Furthermore, the company is well-positioned to benefit from pent-up travel demand, driven by the easing of COVID-19 restrictions. Also, considering bullish analysts' sentiments around the stock, it could be wise to invest in it now.
How Does Wyndham Hotels & Resorts, Inc. (WH) Stack Up Against its Peers?
WH has an overall POWR Rating of B. One could also check out these other stocks within the Travel - Hotels/Resorts industry with an A (Strong Buy) rating: Bluegreen Vacations Holding Corp. (BVH), and a B (Buy) rating: Travel + Leisure Co. (TNL), and Target Hospitality Corp. (TH).
WH shares were trading at $65.90 per share on Wednesday morning, down $1.58 (-2.34%). Year-to-date, WH has declined -25.88%, versus a -19.27% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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