On Tuesday, Oppenheimer has increased the price target for Wyndham Hotels (NYSE: WH) shares to $115 from the previous $90, while keeping an Outperform rating on the stock. The firm's analyst cited the management's optimistic stance and highlighted Wyndham's long-term EBITDA growth algorithm of 7-10%.
The analyst expects the company's revenue to gain from several factors including an anticipated room growth of 3-5%, a RevPAR (revenue per available room) increase of 2-3%, and a royalty rate growth of approximately 50 basis points.
The analyst also noted the positive impact of the Infrastructure Bill on Wyndham's prospects, along with additional growth avenues such as credit card partnerships. Despite a moderation in Wyndham's economy and midscale segment RevPAR, the analyst pointed out that the company is entering the fourth quarter with easier comparisons to the previous year, where it saw a RevPAR decline of 1% in the fourth quarter of 2023.
Furthermore, the analyst mentioned that STR trends for Wyndham's market segments have been favorable up through early November.
Wyndham's management has been committed to shareholder returns, as indicated by their ongoing dividend payments and stock buyback programs. This approach is part of the reason for maintaining the Outperform rating on the hotel company's stock.
In addition to the raised price target, Oppenheimer has also increased its forecast for Wyndham's fiscal year 2025 EBITDA to $737 million, up from the previous estimate of $726 million. This revision is based on updated assumptions regarding room growth and profit margins. The analyst's report reflects a positive outlook for Wyndham Hotels' financial performance and stock potential.
In other recent news, Wyndham Hotels & Resorts reported a successful third quarter in 2024, with a 7% increase in adjusted EBITDA and a 10% rise in adjusted EPS. The company expanded its room system by 4% and opened over 17,000 rooms. The hotel chain also saw a 40 basis point improvement in franchisee retention and a 2% sequential and 8% year-over-year international net room growth.
Despite a slight dip in U.S. RevPAR, international figures increased by 7%, contributing to the company's robust growth. Wyndham also added over 2 million new rewards members, bringing its global total to over 112 million. The company has raised its full-year adjusted diluted EPS guidance to a range of $4.22 to $4.34.
In terms of future developments, Wyndham is set to introduce its Microtel brand in India with a plan to add 40 new hotels by 2031. The company's Project ECHO is allocated $100 million with capital deployment expected to increase in 2025 and 2026.
Furthermore, the company's development pipeline grew nearly 5% year-over-year, reaching a record 248,000 rooms. These recent developments underline Wyndham's optimistic outlook and commitment to shareholder and franchisee value.
InvestingPro Insights
Recent data from InvestingPro aligns with Oppenheimer's optimistic outlook on Wyndham Hotels (NYSE: WH). The company's market cap stands at $7.55 billion, with a P/E ratio of 24.8 over the last twelve months as of Q3 2024. Wyndham's impressive gross profit margin of 68.84% and operating income margin of 38.68% underscore its operational efficiency, supporting the analyst's positive stance on the company's financial performance.
InvestingPro Tips reveal that Wyndham has raised its dividend for 3 consecutive years, demonstrating a commitment to shareholder returns that aligns with the management's approach highlighted in the article. Additionally, 8 analysts have revised their earnings upwards for the upcoming period, suggesting growing confidence in Wyndham's future performance.
The stock's strong recent performance is evident, with a 33.62% price total return over the last three months and a 35.57% return over the last six months. This momentum is consistent with the analyst's raised price target and positive outlook on the company's growth prospects.
For investors seeking more comprehensive insights, InvestingPro offers 13 additional tips for Wyndham Hotels, providing a deeper understanding of the company's financial health and market position.
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