Wyndham Worldwide Corporation (WYN) is set to report the third-quarter 2014 results on Oct 24, 2014, before the opening bell. Last quarter, it posted a positive earnings surprise of 2.6%. Let’s see how things are shaping up for this announcement.
Factors to Consider this Quarter
Wyndham Worldwide beat earnings in three out of the trailing four quarters, while comfortably surpassing the revenue estimates in all four.
The company expects adjusted earnings per share in the range of $1.59 to $1.62 in the third quarter of 2014, up from $1.36 in the year-ago quarter. The higher year-over-year earnings expectations reflect outlook for solid RevPAR growth in the company’s domestic operations. However, the Zacks Consensus Estimate stands at $1.63, which is just above the higher end of the company’s guidance. The fact that the company’s guidance is lower than the Zacks Consensus Estimate reflects that there is some concern about the sluggish macroeconomic conditions.
Additionally, lingering political uncertainty in Latin America and in some parts of Africa and an economic slowdown in China are expected to limit sales growth in the third quarter. Moreover, an uncertain political situation in Ukraine is expected to have a negative impact on the economic sentiment in the Eurozone, thereby impacting the revenues of the company in the upcoming quarters.
However, we believe that the company’s efforts and initiatives to boost traffic led to the positive outlook. In order to survive in the tough economic environment, Wyndham has devised new ways to increase traffic, such as organizing television and digital media campaigns to increase brand awareness while driving direct bookings. Also, the company is launching new prototype hotels to enhance the overall guest experience, and boost revenues.
Earnings Whispers?
Our proven model does not conclusively show that Wyndham Worldwide is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at $1.63. Hence, the difference is 0.00%.
Zacks Rank: Wyndham Worldwide’s Zacks Rank #3 (Hold) when combined with a 0.00% ESP makes surprise prediction difficult. Note that the Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.
Stocks to Consider
Other stocks in the hotels and motels industry and broader consumer discretionary sector that have both a positive Earnings ESP and a favourable Zacks Rank are:
Intrawest Resorts Holdings, Inc. (SNOW), with an Earnings ESP of +1.60% and a Zacks Rank #3.
AMC Entertainment Holdings, Inc. (AMC), with an Earnings ESP of +16.67% and a Zacks Rank #3.
Pinnacle Entertainment Inc. (PNK), with an Earnings ESP of +20.93% and a Zacks Rank #3.
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