Travel + Leisure (NYSE:TNL) Beats Q1 Sales Targets
Hospitality company Travel + Leisure (NYSE:TNL) reported Q1 CY2024 results exceeding Wall Street analysts' expectations, with revenue down 4.2% year on year to $916 million. It made a non-GAAP profit of $0.97 per share, improving from its profit of $0.89 per share in the same quarter last year.
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Travel + Leisure (TNL) Q1 CY2024 Highlights:
- Revenue: $916 million vs analyst estimates of $904.5 million (1.3% beat)
- EPS (non-GAAP): $0.97 vs analyst estimates of $0.86 (12.5% beat)
- Full year adjusted EBITDA guidance maintained, midpoint of $920 million is in line with estimates
- Gross Margin (GAAP): 48.5%, up from 46% in the same quarter last year
- Free Cash Flow of $22 million, down 81.7% from the previous quarter
- Tours: 155,000
- Market Capitalization: $3.28 billion
“We are off to a solid start for the year with a 15 percent increase in tours, 28 percent growth in new owner tours and volume per guest above $3,000,” said Michael D. Brown, president and chief executive officer of Travel + Leisure Co.
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
Examining a company's long-term performance can provide clues about its business quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. 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 6.9% over the last two years is above its five-year trend, suggesting some bright spots.
We can better understand the company's revenue dynamics by analyzing its number of tours, which reached 155,000 in the latest quarter. Over the last two years, Travel + Leisure's tours averaged 19.1% year-on-year growth. Because this number is higher than its revenue growth during the same period, we can see the company's monetization of its consumers has fallen. 
This quarter, Travel + Leisure reported reasonable year-on-year revenue growth of 4.2%, and its $916 million of revenue topped Wall Street's estimates by 1.3%. Looking ahead, Wall Street expects sales to grow 4.4% over the next 12 months, an acceleration from this quarter.
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Cash Is King
Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can't use accounting profits to pay the bills.
Over the last two years, Travel + Leisure has shown mediocre cash profitability, putting it in a pinch as it gives the company limited opportunities to reinvest, pay down debt, or return capital to shareholders. Its free cash flow margin has averaged 7.5%, subpar for a consumer discretionary business.
Travel + Leisure's free cash flow came in at $22 million in Q1, equivalent to a 2.4% margin. This result was great for the business as it flipped from cash flow negative in the same quarter last year to cash flow positive this quarter. Over the next year, analysts predict Travel + Leisure's cash profitability will improve. Their consensus estimates imply its LTM free cash flow margin of 8% will increase to 12.1%.
Key Takeaways from Travel + Leisure's Q1 Results
It was good to see Travel + Leisure beat analysts' revenue and EPS expectations this quarter. Full year EBITDA guidance was maintained, showing that the company is on track. This guidance was also in line with estimates, meaning no surprises. Overall, this quarter's results seemed fairly positive and shareholders should feel optimistic. The stock is flat after reporting and currently trades at $46 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.
