Hospitality company Travel + Leisure (NYSE:TNL) reported Q4 CY2024 results beating Wall Street’s revenue expectations, with sales up 3.9% year on year to $971 million. Its non-GAAP profit of $1.72 per share was 1.9% above analysts’ consensus estimates.
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Travel + Leisure (TNL) Q4 CY2024 Highlights:
- Revenue: $971 million vs analyst estimates of $959.8 million (3.9% year-on-year growth, 1.2% beat)
- Adjusted EPS: $1.72 vs analyst estimates of $1.69 (1.9% beat)
- Adjusted EBITDA: $252 million vs analyst estimates of $247.8 million (26% margin, 1.7% beat)
- EBITDA guidance for the upcoming financial year 2025 is $970 million at the midpoint, below analyst estimates of $975.9 million
- Operating Margin: 21.2%, in line with the same quarter last year
- Free Cash Flow Margin: 7.7%, down from 12.8% in the same quarter last year
- Conducted Tours: 175,000, up 3,000 year on year
- Market Capitalization: $3.79 billion
Company Overview
Formerly known as Wyndham Destinations, Travel + Leisure (NYSE:TNL) is a global vacation company that provides travelers with vacation ownership, exchange, and travel services.
Travel and Vacation Providers
Airlines, 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 airlines, 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 sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Unfortunately, Travel + Leisure struggled to consistently increase demand as its $3.87 billion of sales for the trailing 12 months was close to its revenue five years ago. This was below our standards and signals it’s a low quality business.
We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new property or trend. Travel + Leisure’s annualized revenue growth of 4.1% over the last two years is above its five-year trend, but we were still disappointed by the results. 
Travel + Leisure also discloses its number of conducted tours, which reached 175,000 in the latest quarter. Over the last two years, Travel + Leisure’s conducted tours averaged 13.6% year-on-year growth. Because this number is higher than its revenue growth during the same period, we can see the company’s monetization has fallen. 
This quarter, Travel + Leisure reported modest year-on-year revenue growth of 3.9% but beat Wall Street’s estimates by 1.2%.
Looking ahead, sell-side analysts expect revenue to grow 4.4% over the next 12 months, similar to its two-year rate. This projection is underwhelming and suggests its newer products and services will not catalyze better top-line performance yet.
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Cash Is King
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
Travel + Leisure has shown mediocre cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 8.7%, subpar for a consumer discretionary business. The divergence from its good operating margin stems from its capital-intensive business model, which requires Travel + Leisure to make large cash investments in working capital and capital expenditures.
Travel + Leisure’s free cash flow clocked in at $75 million in Q4, equivalent to a 7.7% margin. The company’s cash profitability regressed as it was 5.1 percentage points lower than in the same quarter last year, prompting us to pay closer attention. Short-term fluctuations typically aren’t a big deal because investment needs can be seasonal, but we’ll be watching to see if the trend extrapolates into future quarters.
Over the next year, analysts predict Travel + Leisure’s cash conversion will improve. Their consensus estimates imply its free cash flow margin of 9.9% for the last 12 months will increase to 13.2%, it options for capital deployment (investments, share buybacks, etc.).
Key Takeaways from Travel + Leisure’s Q4 Results
It was good to see Travel + Leisure narrowly top analysts’ revenue, EPS, and EBITDA expectations this quarter. On the other hand, its number of tours conducted and full-year EBITDA guidance missed. Zooming out, we think this was a decent quarter featuring some areas of strength but also some blemishes. The stock remained flat at $57.50 immediately following the results.
So do we think Travel + Leisure is an attractive buy at the current price? 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.
