Baird, a financial services firm, raised its price target for Wyndham Hotels & Resorts (NYSE: WH) shares to $92 from the previous target of $88, while maintaining an Outperform rating for the stock.
The adjustment reflects the firm's optimism about the hotel chain's future growth prospects.
The analyst at Baird highlighted expectations for Wyndham's net unit growth and revenue per available room (RevPAR) to see improvement in 2025.
The anticipated growth is attributed to an increase in ECHO Suites deliveries, which could contribute approximately 30 basis points (bps) to the net unit growth in 2025.
Additionally, a more supportive leisure demand environment in the United States is expected, bolstered by lower interest rates, a solid employment outlook, and a steady and favorable economic climate.
Despite these positive projections for 2025, the analyst noted that near-term U.S. RevPAR trends remain sluggish, with leisure demand continuing to normalize. Consequently, the third quarter of 2024 (3Q24) top-line performance is not expected to exceed expectations.
However, looking ahead, the analyst anticipates that Wyndham's RevPAR growth could receive a modest boost in the fourth quarter of 2024 (4Q24), potentially extending into the first quarter of 2025 (1Q25), due to recent hurricanes. The disasters in Florida and Texas, where Wyndham has significant market presence, are likely to drive post-storm demand related to clean-up, insurance, and rebuilding efforts, resulting in an approximate 50 bps lift in domestic RevPAR growth.
In other recent news, Wyndham Hotels & Resorts demonstrated a strong financial performance, with a 6% increase in adjusted EBITDA and a 12% rise in earnings per share in the second quarter of 2024. The company also reported significant strides in its development pipeline, with nearly 2,000 hotels and a record 245,000 rooms.
Goldman Sachs (NYSE:GS) initiated coverage on Wyndham Hotels with a Buy rating, citing improved economic conditions and revised full-year 2024 revenue per available room (RevPAR) guidance as key factors. The firm also projected accelerated room growth for Wyndham, from 3.5% in 2023 to approximately 4% in the years 2024 and 2025.
Stifel, another financial services firm, recently upgraded its price target for Wyndham Hotels from $89 to $91, maintaining a Buy rating. This adjustment followed the hotel chain's record growth in its development pipeline.
Wyndham's outlook for 2024 includes projections for flat year-over-year RevPAR growth and fee-related revenues expected to reach between $1.41 billion and $1.43 billion. Adjusted net income is forecasted to increase from $338 million to $348 million, with adjusted diluted EPS projected to be in the range of $4.20 to $4.32.
InvestingPro Insights
Adding to Baird's optimistic outlook on Wyndham Hotels & Resorts (NYSE:WH), recent data from InvestingPro provides additional context to the company's financial performance and market position. Wyndham's market capitalization stands at $6.47 billion, reflecting its significant presence in the hospitality industry. The company's P/E ratio of 26.34 suggests that investors are willing to pay a premium for its earnings, potentially due to the growth prospects highlighted by Baird.
InvestingPro Tips reveal that Wyndham has been aggressively buying back shares, which often signals management's confidence in the company's future and can potentially boost earnings per share. Additionally, the company has raised its dividend for three consecutive years, aligning with Baird's positive outlook on Wyndham's financial health and shareholder returns.
Wyndham's impressive gross profit margin of 68.08% for the last twelve months ending Q2 2024 underscores its operational efficiency, which could contribute to the improved RevPAR and net unit growth projected by Baird for 2025. The company's revenue growth of 2.81% over the same period, while modest, provides a foundation for the anticipated improvements in the coming years.
For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips that could provide deeper insights into Wyndham's investment potential.
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