Can Wyndham Stop Its Declining Profitability in 4Q15?



Adjusted EBITDA margins

In 3Q15, Wyndham (WYN) saw its adjusted EBITDA margin decrease to 24.2% from 27.1% in 3Q14. The decrease was mainly due to a one-time management termination fee and impairment costs. However, the company saw its margins grow on a YoY (year-over-year) basis in the first two quarters of 2015.

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Analyst estimates

Wall Street analysts expect Wyndham’s 4Q15 adjusted EBITDA margins to be at 21.1% compared to 17.3% in 4Q14. Analysts are also expecting the margins to increase further in all four quarters of 2016. Growing revenue along with rising margins is expected to lead to high EBITDA growth in 2016. The growth in profitability is expected to come mostly from the hotel segment. As stated in the previous article, Wyndham has three operating segments of which the hotel segment is growing the quickest. It is also the most profitable overall. Thus, a larger exposure to the growing hotel segment will drive the company’s profitability margins in 4Q15.

2015 full year results

Wyndham has seen its adjusted EBITDA margins fall in the last five years. If Wyndham meets analyst estimates in 4Q15, it will be the first time in the last five years that it has increased its full year YoY adjusted EBITDA margin.

Investors can gain exposure to the hotel sector by investing in the iShares Russell 1000 Growth (IWF), which invests approximately 3% in the hotel sector. The ETF invests 0.09% in Wyndham, 0.14% in Marriott International (MAR), 0.12% in Hilton Worldwide Holdings (HLT), and 0.12% in Starwood Hotels & Resorts Worldwide (HOT).


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