Travel + Leisure (NYSE:TNL) Misses Q4 Revenue Estimates
Hospitality company Travel + Leisure (NYSE:TNL) fell short of analysts' expectations in Q4 FY2023, with revenue up 4% year on year to $935 million. It made a non-GAAP profit of $1.98 per share, improving from its profit of $1.30 per share in the same quarter last year.
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Travel + Leisure (TNL) Q4 FY2023 Highlights:
- Revenue: $935 million vs analyst estimates of $944 million (1% miss)
- EPS (non-GAAP): $1.98 vs analyst estimates of $1.37 (44.1% beat)
- Free Cash Flow of $298 million, up from $74 million in the previous quarter
- Gross Margin (GAAP): 53.6%, up from 49.2% in the same quarter last year
- Tours: 172,000
- Market Capitalization: $2.99 billion
“Our team produced strong year-over-year growth in revenue, vacation ownership sales and adjusted EBITDA, enabling us to return $443 million in capital to shareholders through dividends and stock buybacks," said Michael D. Brown, President and CEO.
Formerly known as Wyndham Destinations, Travel + Leisure (NYSE:TNL) is a global vacation company that provides travelers with vacation ownership, exchange, and travel services.
Hotels, Resorts and Cruise Lines
Hotels, resorts, and cruise line companies often sell experiences rather than tangible products, and in the last decade-plus, consumers have slowly shifted from buying "things" (wasteful) to buying "experiences" (memorable). In addition, the internet has introduced new ways of approaching leisure and lodging such as booking homes and longer-term accommodations. Traditional hotel, resorts, and cruise line companies must innovate to stay relevant in a market rife with innovation.
Sales Growth
Reviewing a company's long-term performance can reveal insights into its business quality. Any business can have short-term success, but a top-tier one sustains growth for years. Travel + Leisure's revenue was flat over the last five years. 
Within consumer discretionary, a long-term historical view may miss a company riding a successful new property or emerging trend. That's why we also follow short-term performance. Travel + Leisure's annualized revenue growth of 9.4% over the last two years is above its five-year trend, suggesting some bright spots.
We can dig even further into the company's revenue dynamics by analyzing its number of tours, which reached 172,000 in the latest quarter. Over the last two years, Travel + Leisure's tours averaged 22.5% year-on-year growth. Because this number is higher than its revenue growth during the same period, we can see the company's average selling price has fallen. 
This quarter, Travel + Leisure's revenue grew 4% year on year to $935 million, falling short of Wall Street's estimates. Looking ahead, Wall Street expects sales to grow 4% over the next 12 months, a deceleration from this quarter.
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Cash Is King
If you've followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills.
Over the last two years, Travel + Leisure has shown decent cash profitability, giving it some reinvestment opportunities. The company's free cash flow margin has averaged 11.5%, slightly better than the broader consumer discretionary sector.
Travel + Leisure's free cash flow came in at $298 million in Q4, equivalent to a 31.9% margin and up 87.4% year on year. Over the next year, analysts' consensus estimates show they're expecting Travel + Leisure's LTM free cash flow margin of 12.1% to remain the same.
Key Takeaways from Travel + Leisure's Q4 Results
We were impressed by how significantly Travel + Leisure blew past analysts' EPS expectations this quarter. That stood out as a positive in these results. On the other hand, its operating margin missed and its revenue fell short of Wall Street's estimates, driven by underperformance in both its Vacation Ownership and Travel and Membership segments.
The company also recently announced the acquisition of Accor Vacation Club to build its presence in the Asia-Pacific region and repurchased $307 million of common stock during 2023 (at an average price of $39.11), equivalent to roughly 10% of its current market capitalization.
Looking ahead, the company's full-year 2024 EBITDA guidance came ahead of analysts' estimates ($920 million vs estimates of $915 million). Overall, this quarter's results seemed decent, and we're glad the company is buying back its shares. The stock is flat after reporting and currently trades at $41.55 per share.
So should you invest in Travel + Leisure right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
