Club Wyndham App And Sports Illustrated Vacation Club Expected To Improve Future Prospects

Key Takeaways

• Integration with Accor Vacation Club and new partnerships are set to boost sales and revenue, positively impacting future earnings.
  
• Digital tool launches and capital strategies aim to increase bookings, enhance cash flow, and drive future earnings and growth.
  
• Structural headwinds, higher delinquencies, and uncertain financial environments present risks to revenue growth, margins, and earnings for Travel + Leisure.

Catalysts

Provides hospitality services and travel products in the United States and internationally.

• The integration of Accor Vacation Club exceeded initial expectations, contributing $6 million in adjusted EBITDA. Continued integration and strengthened partnerships are expected to further boost sales and adjusted EBITDA for the business, likely impacting future revenue and earnings positively.
  
• New partnerships with companies like Allegiant Airlines and Live Nation are expected to provide cross-marketing and lead generation opportunities, opening the door for multi-year incremental tour opportunities. This is expected to drive future revenue growth.
  
• The launch of new digital tools such as the Club Wyndham app, which has shown a 30% higher booking conversion rate than the website, is expected to enhance user engagement and satisfaction, likely leading to an increase in bookings and revenue.
  
• The potential launch of the Sports Illustrated Vacation Club brand, with announcements and expected sales starting in 2025, could provide meaningful growth opportunities, impacting future revenue and earnings positively as the brand establishes itself.
  
• Disciplined capital allocation, share repurchases, dividend increases, and operational efficiencies are expected to improve cash flow conversion and shareholder value, potentially driving future earnings and EPS growth.

Travel + Leisure Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Travel + Leisure's revenue will grow by 3.7% annually over the next 3 years.
• Analysts assume that profit margins will increase from 9.8% today to 12.3% in 3 years time.
• Analysts expect earnings to reach $531.2 million (and earnings per share of $8.28) by about March 2028, up from $378.0 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 9.2x on those 2028 earnings, up from 9.0x today. This future PE is lower than the current PE for the US Hospitality industry at 23.9x.
• Analysts expect the number of shares outstanding to decline by 6.41% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 11.41%, as per the Simply Wall St company report.

Travel + Leisure Future Earnings Per Share Growth

Risks

• The structural headwinds and ongoing consolidation in the timeshare exchange business present risks, as the migration from external to internal exchanges puts pressure on this segment, potentially impacting revenue growth and margins adversely.
  
• Higher delinquencies noted in the vacation ownership segment compared to historical levels remain a concern, as they could result in increased loan loss provisions, which would negatively affect net margins.
  
• The reliance on uncertain interest rate environments and potential foreign exchange volatility poses a risk to controlling financing costs, which may adversely impact earnings.
  
• There is execution risk associated with the planned launch of Sports Illustrated sales and potential expansion, which could impact revenue growth if not effectively managed.
  
• Continued elevated delinquencies in the loan portfolio and the associated loan loss provisions, which remain high, could strain net income levels if not mitigated over time.

Valuation

• The analysts have a consensus price target of $65.615 for Travel + Leisure based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $76.0, and the most bearish reporting a price target of just $54.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $4.3 billion, earnings will come to $531.2 million, and it would be trading on a PE ratio of 9.2x, assuming you use a discount rate of 11.4%.
  
• Given the current share price of $51.03, the analyst price target of $65.62 is 22.2% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.