Investors in Travel + Leisure Co. (NYSE:TNL) had a good week, as its shares rose 9.4% to close at US$60.43 following the release of its full-year results. It was a pretty bad result overall; while revenues were in line with expectations at US$2.2b, statutory losses exploded to US$2.97 per share. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there’s been a strong change in the company’s prospects, or if it’s business as usual. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Following the latest results, Travel + Leisure’s eight analysts are now forecasting revenues of US$2.97b in 2021. This would be a sizeable 38% improvement in sales compared to the last 12 months. Earnings are expected to improve, with Travel + Leisure forecast to report a statutory profit of US$2.92 per share. Before this earnings report, the analysts had been forecasting revenues of US$3.05b and earnings per share (EPS) of US$3.12 in 2021. The analysts are less bullish than they were before these results, given the reduced revenue forecasts and the small dip in earnings per share expectations.
What’s most unexpected is that the consensus price target rose 18% to US$66.31, strongly implying the downgrade to forecasts is not expected to be more than a temporary blip. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company’s valuation. Currently, the most bullish analyst values Travel + Leisure at US$76.00 per share, while the most bearish prices it at US$52.00. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Travel + Leisure shareholders.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. One thing stands out from these estimates, which is that Travel + Leisure is forecast to grow faster in the future than it has in the past, with revenues expected to grow 38%. If achieved, this would be a much better result than the 11% annual decline over the past five years. Compare this against analyst estimates for the wider industry, which suggest that (in aggregate) industry revenues are expected to grow 24% next year. Not only are Travel + Leisure’s revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider industry.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. They also downgraded their revenue estimates, although industry data suggests that Travel + Leisure’s revenues are expected to grow faster than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for Travel + Leisure going out to 2024, and you can see them free on our platform here.
You still need to take note of risks, for example – Travel + Leisure has 3 warning signs (and 1 which doesn’t sit too well with us) we think you should know about.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.