Zacks Analyst Blog Highlights: Wyndham Worldwide Corporation, Starwood Hotels & Resorts Worldwide, Marriott International, American Axle and Manufacturing and General Motors

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Feb 10, 2011, 09:55 ET

CHICAGO, Feb. 10, 2011 /PRNewswire/ -- Zacks.com Analyst Blog features: Wyndham Worldwide Corporation (NYSE: WYN), Starwood Hotels & Resorts Worldwide Inc. (NYSE: HOT), Marriott International Inc. (NYSE: MAR), American Axle and Manufacturing Inc. (NYSE: AXL) and General Motors Company (NYSE: GM).

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Here are highlights from Wednesday's Analyst Blog:

Wyndham Beats EPS, Misses Rev

Wyndham Worldwide Corporation's (NYSE: WYN) fourth quarter 2010 adjusted earnings of 46 cents per share outpaced both the Zacks Consensus Estimate of 44 cents and the company's guidance of 40 to 44 cents.

In the year-earlier quarter, the company had earned 40 cents per share. On a reported basis, Wyndham reported earnings of 43 cents per share versus 40 cents recorded in the prior-year quarter.

The increase was largely driven by higher revenue per available room (RevPAR) in the Lodging business, strong operational performance by the Vacation Ownership business and a lower effective tax rate.

Net revenue nudged up 2.6% year over year to $937 million in the quarter under review, reflecting a modest adjusted sales momentum in each of Wyndham's three business units. However, revenues fell short of the Zacks Consensus Estimate of $942 million.

For full-fiscal 2010, earnings were $2.00 per share versus $1.80 in 2009. Revenues increased 2.7% to $3,851 million.

Inside the Headline Numbers

The Lodging segment's revenues increased 9% year over year to $163 million driven by a 10% rise in RevPAR and other franchise fees. Incremental revenue from the recently acquired Tryp hotel brand and higher fees generated from ancillary services provided to franchisees also contributed to the growth.

Revenues from the Vacation Exchange and Rentals segment also grew 9% year over year to $282 million. On a constant currency basis, revenues expanded 12%. Vacation rental revenues surged 16% from the prior-year period to $114 million buoyed by the recently acquired businesses including James Villa Holidays. Exchange revenues were $153 million, flat year over year.

Revenues from the Vacation Ownership segment slipped 2.2% to $497 million. The decrease was due tough comparisons as 2009 included the recognition of $47 million previously deferred POC revenues. An increase in gross Vacation Ownership Interest sales, a lower provision for loan losses and incremental sales under the Wyndham Asset Affiliation Model partially offset this absence.

Hotel Update

At quarter-end, Wyndham had approximately 7,210 properties and 612,700 rooms, up from 7,150 properties in the prior quarter. The development pipeline included over 900 hotels and approximately 103,000 rooms, of which 55% were newly construction and 51% were international.

Outlook

Management maintained its guidance for 2011, which assumes revenues of approximately $4.0–$4.2 billion and adjusted EBITDA of approximately $925–$955 million.

Our Take

We expect Wyndham to benefit from its repositioning to a more fee-for-service-based business, free cash flow generation and a series of acquisitions including James Villa Holidays and ResortQuest, and remain optimistic on the stock. Moreover, the company is strengthening its presence in Europe and Latin America as well as Asian markets like China and India.

However, considering intense competition from its peers Starwood Hotels & Resorts Worldwide Inc. (NYSE: HOT) and Marriott International Inc. (NYSE: MAR) and slow revival in the US lodging industry, we remain on the sidelines. Wyndham currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock.

American Axle Excels in Q4

American Axle and Manufacturing Inc. (NYSE: AXL) posted a profit of $34.9 million or 47 cents per share in the fourth quarter of 2010, surpassing the Zacks Consensus Estimate of 38 cents per share.

The profit rose from $8.3 million or 14 cents per share (excluding special items) in the fourth quarter of 2009 driven by higher content per vehicle or CPV (dollar value of its product sales supporting GM's North American light truck and SUV programs and Chrysler's heavy duty Dodge Ram pickup trucks). The company's CPV improved 8% to $1,508 from $1,401 in the fourth quarter of 2009.

Revenues in the quarter appreciated 26% to $583.3 million. In the North American light truck and SUV programs, the customer production volume went up by 12%. The growth was seen as the company's measure to support General Motors Company (NYSE: GM) and Chrysler.

The company progressed well in diversifying its customer base during the quarter. The company had a high exposure to customers, including GM and Chrysler. However, the company's non-GM sales grew 52% to $156.6 million (27% of sales) in the quarter from $102.9 million (22%) a year ago.

American Axle's gross profit was $101.6 million (17.4%) compared with $68.4 million (14.7%) in the fourth quarter of 2009. The company's operating profit was $51 million (8.7%), up from $29 million (6.25%) in the prior year.

Full Year Results

For full year 2010, American Axle reported a profit of $115.4 million or $1.55 per share in contrast to a loss of $66 million or $1.25 per share (excluding special items) in 2009. Revenues soared 50% to $2.28 billion from $1.52 billion in 2009.

Non-GM sales swelled 70% to $563.0 million (25%) from $331.2 million (22%) in 2009. CPV improved 3% to $1,441 from $1,403 a year ago.

Financial Position

American Axle had cash and cash equivalents of $244.6 million as of December 31, 2010, up from $178.1 million in the prior-year period. Long-term debt increased $61.4 million on a year-over-year basis to $1.01 billion as of the above date, reflecting a debt-to-equity ratio of 1.86.

In 2010, American Axle's operating net cash flow improved significantly to $240.3 million from $15.9 million in 2009 due to higher income. Meanwhile, capital expenditures reduced to $108.3 million from $137.7 million a year ago.

In the same period, the company's free cash flow was $136.9 in contrast to an outflow of $89.8 million in the prior year. The free cash flow was influenced by cash payments of $46.9 million for restructuring actions related to the company's obligations under hourly and salaried attrition programs and the buy-down program for United Auto Workers-represented associates at its manufacturing facilities in Detroit, Michigan; Three Rivers, Michigan; and Cheektowaga, New York.

Outlook

American Axle expects sales to grow more than 5% to $2.4 billion in 2011, driven by the rebound in U.S. auto sales and turnaround of both of its highly exposed customers, GM and Chrysler. The company has forecasted 2011 U.S. light vehicle sales to increase to 12.5 million–13 million units in the year from 11.6 million units in 2010.

Further, the company intends to diversify its business by reducing its dependence on GM. It expects its non-GM sales to account for at least 40% of total revenue by 2013. These factors along with the strong results have led the company to retain a Zacks #1 Rank on its stock, which translates to a "Strong Buy" rating for the short term (1 to 3 months).

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