(Corrects 12th paragraph to show company will see a total of $150 million to $200 million in deferred revenue in 2009)
* Adjusted EPS 41 cents vs 36 cents consensus
* Shares surge 38 percent on NYSE
* Reiterates full-year outlook
* Wyndham revenue off 11 pct as demand dwindles (Adds byline, conference call details, analyst comment)
By Deepa Seetharaman
NEW YORK, April 29 (Reuters) - Wyndham Worldwide Corp (WYN.N) reported a better-than-expected quarterly profit on Wednesday, helped by broad cost cuts, particularly in its time-share business, sending its shares up 38 percent.
The world’s biggest time-share operator posted a first-quarter net profit of $45 million, or 25 cents a share. A year ago, the former Cendant Corp unit posted a net profit of $42 million, or 24 cents a share.
Excluding restructuring costs, earnings were $74 million, or 41 cents per share. Wall Street analysts on average were expecting 36 cents a share, according to Reuters Estimates.
Shares of Wyndham, which also operates hotel brands Ramada, Days Inn and Super 8, rose $3.37 to $12.13 in morning trading on the New York Stock Exchange, where it was the biggest percentage gainer.
“We’ve cut costs everywhere,” Wyndham Chief Executive Steve Holmes said in an interview with Reuters. “We run a fairly lean shop to begin with but in an environment like this we have to take a look at everything.”
Total expenses fell 12.4 percent from a year ago with the most significant cost cuts coming from Wyndham’s vacation time-share business, where the company had to cut “a large number” of marketing and sales employees, Holmes said.
The Parsippany, New Jersey-based company earlier said it would downsize this segment to improve overall cash flow and trim expenses.
”For the current business environment, the costs are very well scaled,“ said Chris Woronka, analyst with Deutsche Bank. ”We’ve seen it across the entire space. Cost cutting is having a significant impact.
But Woronka added: “It’s going to be difficult to get significant cuts beyond where you are... and to stimulate growth in the future you obviously have to bring costs back.”
TRAVEL DEMAND WEAK, BUT “LESS PRESSURE”
Wyndham and its peers in the once-booming hotel industry have suffered as travel demand dwindles. On Tuesday, Moody’s Investor Services cut Wyndham corporate credit rating two notches into junk status on expectations that weak demand would pressure earnings into 2010. [ID:nN28336113]
Wyndham said revenue dropped 11 percent to $901 million, hurt by faltering demand and the impact of a stronger U.S. dollar. Analysts had expected first-quarter revenue to be about $825.6 million, according to Reuters Estimates.
The revenue figure includes $67 million of revenue previously deferred from the sale of vacation ownership interests and the company said during its conference call it expects to see $150 million to $200 million in deferred revenue throughout 2009.
Sales in the time-share business fell 39 percent, driven by Wyndham’s efforts to reduce properties in that segment. The company has roughly 7,000 properties and 21 percent of its rooms are abroad.
In recent weeks, chief executives from other hotel companies including Marriott International MAR.N and Starwood Hotels & Resorts HOT.N said they have seen demand begin to stabilize, a viewpoint Holmes cautiously endorses.
“We do see signs that there is less pressure,” Holmes said, but warned “that could flip again in three weeks because there has been tremendous volatility in the market.”
The company said it expected second-quarter adjusted earnings to be between 36 cents and 41 cents and reiterated its full-year earnings outlook.
At the Reuters Summit in March, Holmes said worldwide revenue per available room (RevPAR) would fall between 6 percent and 10 percent. [ID:nN03477763]
“Based on what we saw in the first quarter, we probably lean toward the 10 percent than the 6 percent decline,” he said. “We’re seeing a continuation of pressure.”
Reporting by Deepa Seetharaman, editing by Maureen Bavdek, Dave Zimmerman