On Thursday, Truist Securities adjusted its outlook for Travel + Leisure Co. (NYSE:TNL) shares, reducing the price target to $60 from the previous $65, while keeping a Buy rating on the stock. The revision reflects a new valuation based on updated earnings projections and a lower multiple used in the firm's sum-of-the-parts analysis.
The firm's analyst has updated the company's financial projections, with the 2024 Adjusted EBITDA estimate slightly increased to $928 million from $927 million, and the 2024 earnings per share (EPS) estimate raised to $5.99 from $5.59. Looking ahead to 2025, the Adjusted EBITDA projection is set at $972 million, up from $969 million, with the EPS forecast at $6.29, an increase from the earlier $6.07 estimate.
These projections are part of the rationale behind the new price target of $60, which now uses a blended 8.0x multiple on the firm's 2025 estimated EBITDA, a decrease from the previous 8.4x multiple. The analyst notes that the current trading multiples for Travel + Leisure are 7.2 times and 6.8 times the firm's 2024 and 2025 EBITDA estimates, respectively.
Historical trading data was also cited to provide context for Travel + Leisure's valuation. Before the Covid-19 pandemic, during the years 2018 and 2019, the company's stock traded at 6.5 to 7.5 times two-year forward enterprise value to EBITDA (EV/EBITDA). Moreover, the stock's predecessor, Wyndham (WYN), had a historical trading range of 4.0 to 12.0 times two-year forward EV/EBITDA, according to the analyst.
The revised price target and the associated financial estimates reflect the firm's latest analysis of Travel + Leisure's stock performance and potential. The maintained Buy rating indicates Truist Securities' continued positive outlook on the company despite the adjustment in the price target.
In other recent news, Travel + Leisure Co. announced a regular cash dividend of $0.50 per share, scheduled for payment to shareholders on record as of September 13, 2024. Similarly, Wyndham Hotels & Resorts, Inc. declared a quarterly cash dividend of $0.38 per share, payable to shareholders of record on the same date.
These developments follow Travel + Leisure's robust Q2 performance, marked by a 4% increase in revenue to $985 million and a rise in adjusted EBITDA to $244 million. The company's growth is attributed to its vacation ownership business and strategic partnerships, leading to the raise of its full-year adjusted EBITDA guidance to between $915 million and $935 million. International growth was also noted, with a 33% increase in adjusted EBITDA in the Asia-Pacific region.
Despite a slight increase in loan loss provisions and a decline in transactions in the Travel and Membership segment, the company remains confident in its business model. Analysts anticipate a slight headwind in the first half of next year due to these concerns, followed by a tailwind in 2026.
InvestingPro Insights
In light of Truist Securities' updated outlook on Travel + Leisure Co. (NYSE:TNL), real-time data and InvestingPro tips provide additional context for investors. Travel + Leisure's market capitalization stands at $3.04 billion, illustrating its significant presence in the market.
The company's current P/E ratio is 7.19, indicating that it is trading at a low earnings multiple, which is in line with the analyst's observation of lower trading multiples. Moreover, the company's revenue has shown growth over the last twelve months, with a 4.26% increase, signaling steady business performance.
InvestingPro Tips highlight that management's aggressive share buybacks could be a sign of confidence in the company's value. Moreover, the company has maintained dividend payments for 18 consecutive years, offering a dividend yield of 4.6%, which might appeal to income-focused investors.
It is also worth noting that analysts predict the company will be profitable this year, with profitability already demonstrated over the last twelve months. For investors seeking further guidance, there are additional InvestingPro Tips available on https://www.investing.com/pro/TNL.
These insights and metrics should be considered alongside the analyst's revised price target and financial projections, as they offer a broader picture of Travel + Leisure's financial health and market position.
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