Wyndham Hotels: Goldman Sachs Boosts Stock with Buy Rating

Author: Owen Jenkins Updated: 09-18-2024 02:07 PM

Goldman Sachs Begins Coverage on Wyndham Hotels

Goldman Sachs has officially started its coverage on Wyndham Hotels & Resorts (NYSE: WH) with a favorable Buy rating, establishing a price target set at $96.00. This notable endorsement underscores the positive economic conditions currently being observed, along with the company's optimistic full-year 2024 revenue per available room (RevPAR) guidance.

Positive Outlook and Growth Potential

The reassessment of Wyndham's financial position indicates that risks affecting the second half of the year have been significantly reduced. This reassessment offers a potentially steady period for the hotel operator's stock, reflecting a more secure investment environment.

Despite prior worries about a slowing U.S. economy's impact on RevPAR, recent performance metrics have shown encouraging improvements, particularly in the economy chainscale segment. This suggests that Wyndham has been able to withstand economic headwinds very effectively.

Projected Growth and Performance Indicators

Goldman Sachs forecasts that Wyndham's room growth will experience a rise from 3.5% in 2023 to approximately 4% in both 2024 and 2025. This upward trajectory is expected to surpass historical averages, largely due to factors like ECHO developments, better franchisee retention, and a strategic push into international markets.

Moreover, the firm anticipates that Wyndham will gain from additional EBITDA growth drivers, such as its ECHO development initiative and various new fee streams. Although current projections from analysts are around 7% below the company's guidance for 2025, Goldman Sachs identifies a positive opportunity for growth within Wyndham Hotels.

Recent Developments and Financial Performance

In other notable developments, Wyndham Hotels & Resorts has recently seen significant upgrades from financial services firms. For instance, Stifel has improved its price target for the company from $89 to $91, confirming its Buy rating. This uplift follows the hotel chain's remarkable growth in its development pipeline, which boasts nearly 2,000 hotels and a record count of 245,000 rooms.

Wyndham's recent financial results showcase a robust performance, with an anticipated free cash flow conversion around 60% for the year 2024. The company upholds a consistent quarterly dividend of $0.38, representing a yield of 1.9%. Furthermore, in the second quarter of 2024, Wyndham posted a 6% increase in adjusted EBITDA and a 12% rise in earnings per share, indicating strong operational efficiency.

Additionally, the company's development team has signed 33% more deals than during the previous year, contributing to a burgeoning global development pipeline.

Projecting Future Growth

Looking ahead, Wyndham's outlook for 2024 includes expectations for flat year-over-year RevPAR growth and fee-related revenues projected between $1.41 billion and $1.43 billion. Adjusted net income is estimated to grow from $338 million to $348 million, with adjusted diluted earnings per share predicted to fall between $4.20 and $4.32.

InvestingPro Insights

Wyndham Hotels & Resorts (NYSE: WH) is strategically positioned to navigate the complexities of the hospitality industry with strength and resilience. The data observed by InvestingPro reveals a strong gross profit margin of 68.08% for the last twelve months up to Q2 of 2024, reflecting the company’s stability during challenging economic conditions. This is further exemplified by a dividend yield of 1.94% paired with an impressive 8.57% growth over the same period.

Insights from InvestingPro indicate that Wyndham's management is demonstrating confidence in their strategy through active share buybacks and consistent dividend increases for three consecutive years. These initiatives hint at their expectations for long-term value generation. Analysts anticipate continued profitability for Wyndham this year, likely boosting investor sentiment moving forward.

With a notable market capitalization of $6.18 billion and a forward P/E ratio of 20.27, Wyndham's trading activity is reflecting a premium valuation, which is also evident from its high Price/Book multiple of 9.92. Presently, its stock price is approaching a 52-week high, indicating strong investor optimism about its future prospects.

Frequently Asked Questions

What recent rating did Goldman Sachs give Wyndham Hotels?

Goldman Sachs initiated coverage on Wyndham Hotels with a Buy rating and a price target of $96.00.

What factors contributed to Wyndham's improved financial outlook?

The company's revised RevPAR guidance and strong room growth forecast contributed to the positive financial outlook.

How has Wyndham performed in recent quarters?

Wyndham reported a 6% increase in adjusted EBITDA and a 12% rise in earnings per share for Q2 of 2024, showcasing solid performance.

What is Wyndham’s dividend policy?

Wyndham continues to pay a quarterly dividend of $0.38, yielding approximately 1.9%.

What is Wyndham's projected revenue for 2024?

Wyndham's fee-related revenues for 2024 are expected to reach between $1.41 billion and $1.43 billion.

About Investors Hangout

Investors Hangout is a leading online stock forum for financial discussion and learning, offering a wide range of free tools and resources. It draws in traders of all levels, who exchange market knowledge, investigate trading tactics, and keep an eye on industry developments in real time. Featuring financial articles, stock message boards, quotes, charts, company profiles, and live news updates. Through cooperative learning and a wealth of informational resources, it helps users from novices creating their first portfolios to experts honing their techniques. Join Investors Hangout today: https://investorshangout.com/

Disclaimer: The content of this article is solely for general informational purposes only; it does not represent legal, financial, or investment advice. Investors Hangout does not offer financial advice; the author is not a licensed financial advisor. Consult a qualified advisor before making any financial or investment decisions based on this article. The author's interpretation of publicly available data shapes the opinions presented here; as a result, they should not be taken as advice to purchase, sell, or hold any securities mentioned or any other investments. The author does not guarantee the accuracy, completeness, or timeliness of any material, providing it "as is." Information and market conditions may change; past performance is not indicative of future outcomes. If any of the material offered here is inaccurate, please contact us for corrections.