We expect Wyndham Worldwide Corporation (WYN) to beat expectations when it reports fourth-quarter and full year 2014 results before the market opens on Feb 10, 2015.
Last quarter, the company posted a positive earnings surprise of 2.45%. Notably, the company beat earnings estimates in three of the trailing four quarters and currently has an average positive earnings surprise of 1.93%. Let's see what is in store this quarter.
Why a Likely Positive Surprise?
Our proven model shows that Wyndham is likely to beat earnings because it has the right combination of two key components.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +1.16%. This is meaningful and a leading indicator of a likely positive earnings surprise.
Zacks Rank: Wyndham has a Zacks Rank #2 (Buy). Note that stocks with Zacks Rank #1, 2 and 3 have a significantly higher chance of beating earnings. Meanwhile, the Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.
The combination of Wyndham’s Zacks Rank #2 and +1.16% ESP makes us confident of an earnings beat.
What's Driving the Better-Than-Expected Earnings?
Wyndham expects earnings per share in the range of 83 cents to 86 cents in the fourth quarter of the year, up from the year-ago figure of 73 cents. The Zacks Consensus Estimate is currently pegged at 86 cents per share.
We believe that its efforts and initiatives to boost traffic would help the company to achieve its targets. 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 that is helping the company to boost revenues.
Wyndham also derives a substantial chunk of revenues from its vacation ownership or timeshare business. This fee-for-service-based business model is expected to continue to aid revenues in the upcoming quarters.
However, the company’s considerable international presence, lingering political uncertainty in some parts of the world, an economic slowdown in China, and fluctuation in exchange rates would hurt revenue growth.
Other Stocks to Consider
Here are some other companies in the broader consumer discretionary sector that investors may consider, as our model shows that they too have the right combination of elements to post an earnings beat this quarter:
La Quinta Holdings Inc. (LQ) with an Earnings ESP of +40% and a Zacks Rank #3 (Hold).
Extended Stay America, Inc. (STAY) with an Earnings ESP of +6.67% and a Zacks Rank #3.
Hilton Worldwide Holdings Inc. (HLT) with an Earnings ESP of +5.56% and a Zacks Rank #3.
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