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Will Currency Headwinds Hit Wyndham (WYN) Q4 Earnings?

Wyndham Worldwide CorporationWYN is set to report fourth-quarter and full year 2015 results on Feb 9, before the opening bell.

Last quarter, the company posted a positive earnings surprise of 4.71%. In fact, the company has surpassed the earnings estimates in all the trailing four quarters with an average surprise of 5.81%.

Let's see how things are shaping up for this announcement.

Factors to Consider

Wyndham's quarterly earnings have outperformed the Zacks Consensus Estimate since the beginning of 2014. Revenues have also topped the consensus mark over the past three quarters. The upside reflects the company's efforts and initiatives to boost traffic. The company deploys a variety of marketing strategies, including online advertising, social media marketing, and sponsorships and highly targeted direct marketing. It is looking to drive growth with its revised loyalty program.

Meanwhile, through collaborations with leading technology companies like Infor, Sabre and others, the company is in a position to quickly deploy and upgrade revenue generation and property management solutions. These efforts are expected to contribute to revenues in the to-be-reported quarter.

Moreover, given the limited supply and strong demand environment for hotels, the company is expected to have increased pricing power, which should improve RevPAR. 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 in the fourth quarter.

However, Wyndham's vast presence worldwide makes it vulnerable to the changes in economic conditions. Despite immense growth potential, a sluggish economy in Brazil, uncertainty in Africa, macroeconomic factors in Venezuela and government austerity and the ensuing slowdown in China would continue to dampen Wyndham's revenues.

The company also has a significant number of vacation rental properties in Europe, where the macroeconomic environment has been sluggish in the recent times. Also, business in Europe continues to be clouded by geopolitical issues. This would negatively impact the company's revenues in the upcoming quarter.

Moreover, currency headwinds persist due to the strengthening U.S. dollar which reduces the value of overseas sales. These factors would hurt revenues and profits of the company in the to-be-reported quarter.

Earnings Whispers

Our proven model does not conclusively show that Wyndham 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 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP : The company's Earnings ESP stands at 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 99 cents per share.

Zacks Rank : Wyndham carries a Zacks Rank #4 (Sell).

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks to Consider

Here are a few companies in the consumer discretionary sector which have a favorable Zacks Rank and a positive Earnings ESP and are therefore likely to beat earnings:

Marriott Vacations Worldwide Corp. VAC , with an Earnings ESP of +1.09% and a Zacks Rank #2.

SeaWorld Entertainment, Inc. SEAS , with an Earnings ESP of +10.00% and a Zacks Rank #2.

Wynn Resorts Ltd. WYNN , with an Earnings ESP of +9.46% and a Zacks Rank #3.

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WYNN RESRTS LTD (WYNN): Free Stock Analysis Report

WYNDHAM WORLDWD (WYN): Free Stock Analysis Report

MARRIOT VAC WW (VAC): Free Stock Analysis Report

SEAWORLD ENTERT (SEAS): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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