On Jun 19, 2014, we issued an updated research report on
Wyndham Worldwide Corporation
On Apr 24, this leading hotelier posted first quarter 2014 results
with earnings beating the Zacks Consensus Estimate and revenues
matching the same. Adjusted earnings of 78 cents increased 9.9%
year over year owing to a year-over-year increase in revenues and
lower share count.
Net revenue grew 5.6% year over year to $1.19 billion driven by
revenue growth in all the three operating segments. With the
gradually improving economy, the U.S. hotel industry has started to
gain momentum. Wyndham has started witnessing room-rate gains in
the domestic upscale and midscale segments with an increase in
It is seen that the operating environment in the international
market is better than the domestic market, which have been driving
hoteliers to increase their market share globally. Wyndham is thus
consistently trying to expand its presence worldwide. A significant
portion of the company's properties are situated outside the U.S.
including Asia, Middle East, Europe and Latin America. This gives
the company wide international exposure.
Also, the company derives a substantial chunk of its revenues from
its vacation ownership or timeshare business, which has solid
long-term potential. Wyndham Vacation Ownership is the world's
largest vacation ownership business in terms of the number of
resorts, units, owners and revenues. The vacation ownership
industry is expected to grow further owing to increasing household
income and ownership satisfaction and an inclination toward repeat
purchases and frequent trips.
In order to survive in the tough economic environment, Wyndham is
also devising new ways to increase traffic. The company is
launching new prototype hotels that aim at enhancing overall guest
experience, while reducing development costs for franchisees.
Moreover, the company is also busy organizing television and
digital media campaigns, which will help in increasing brand
awareness while driving direct bookings.
Additionally, the company organized podium presentations in the
first quarter to effectively and efficiently introduce prospective
owners to the benefits of timeshare. In 2013, the company rolled
out podium presentations across most of North America for
approximately 40% of current tours and expects it to increase to
60.0% by 2014. The company expects these new tools to drive growth.
Despite the economic turmoil, we appreciate the company's efforts
to consistently enhance shareholder returns. Wyndham is
consistently rewarding shareholders through repurchases and
Despite Wyndham's immense growth potential, a deteriorating
political situation and a weak economy have decelerated overall
Latin American sales. Moreover, tighter credit markets in China,
the political turmoil in Thailand, and Russian actions in Crimea
have further added to the woes. Further, upcoming elections in
Brazil and Indonesia make the situation more unpredictable.
According to the European Central Bank, though financial markets in
Europe have improved, they are yet to reach pre-crisis levels.
Given Wyndham's significant presence in the region, the current
sluggishness in Eurozone may limit the growth of vacation rental
businesses. Eurozone recovery is not expected to be strong enough
in 2014, thereby remaining a concern for this Zacks Rank #2 (Buy)
Other Stocks to Consider
Better-ranked stocks in the hotel industry include
Home Inns & Hotels Management Inc.
Marriott Vacations Worldwide Corporation
Hilton Worldwide Holdings Inc.
). While Home Inns & Hotels Management sports a Zacks Rank #1
(Strong Buy), Marriott Vacations Worldwide and Hilton Worldwide
carry a Zacks Rank #2.
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WYNDHAM WORLDWD (WYN): Free Stock Analysis
HOME INNS&HOTEL (HMIN): Free Stock Analysis
MARRIOT VAC WW (VAC): Free Stock Analysis
HILTON WW HLDG (HLT): Free Stock Analysis
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