On Dec 31, 2014, we issued an updated research report on Wyndham Worldwide Corporation (WYN).
On Oct 24, the company posted mixed third-quarter 2014 results with earnings beating the Zacks Consensus Estimate, but revenues missing the same. Adjusted earnings of $1.67 per share were up 18% from the year-ago period led by year-over-year improvement in revenues. Net revenue grew 6.1% year over year to $1.51 billion, owing to solid revenue growth in all the three operating segments. Given the strong results, the company also increased its earnings guidance for 2014, for the second successive quarter.
With the economy beginning to improve, the U.S. hotel industry has started to grow. Wyndham continues to generate room-rate gains in the domestic upscale and mid-scale segments with increase in occupancy.
Moreover, Wyndham is consistently trying to expand its presence worldwide. A significant portion of the company’s properties is situated outside the U.S. including Asia, Middle East, Europe and Latin America. This gives the company wide international exposure. In addition, these expansions should help the company to gain market share in the hospitality industry, thus boosting its business.
Additionally, the company’s marketing efforts to increase traffic are worth mentioning. Wyndham is launching new prototype hotels to enhance the overall guest experience, while reducing development costs for franchisees. Other marketing efforts, like an umbrella advertising campaign and podium presentations, are being executed by the company to build consumer awareness of its powerhouse brands and loyalty program.
However, we cannot ignore the fact that the company is facing troubles in its served markets. A deteriorating political situation and a sluggish economy in Brazil, Argentina and Chile are weighing on demand in these regions. Moreover, the political turmoil in Thailand, visa restrictions and concerns about the corona virus in Saudi Arabia and Vietnam’s dispute with China add to the woes. Meanwhile, Japan is experiencing pressure owing to a weaker yen and rise in taxes, which might hurt revenues.
Given Wyndham’s significant presence in Europe, the current sluggishness and political instability in certain pockets in Eurozone may limit the growth of its vacation rental business.
Stocks to Consider
Wyndham currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the same sector include Hilton Worldwide Holdings Inc. (HLT) and Intercontinental Hotels Group plc (IHG), both carrying a Zacks Rank #2 (Buy). However, in the broader Leisure services sector, a better-ranked stock is Vail Resorts Inc. (MTN), which sports a Zacks Rank #1 (Strong Buy).
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