Wyndham Worldwide Hits 52 Week High on Steady Growth - Analyst Blog

Shares of Wyndham Worldwide Corporation (WYN) hit a new 52-week high of $84.06 on Nov 28. In fact, the company's share price has increased 9.6% since it posted decent third quarter results on Oct 24.

While third quarter earnings beat the Zacks Consensus Estimate, revenues missed the same. This was the third consecutive quarter of earnings beat. Year-to-date, the company's share price has gained 15.5%.

Adjusted earnings of $1.67 per share increased 18% year over year owing to a year-over-year increase in revenues and lower outstanding share count. Net revenue grew 6.1% year over year to $1.51 billion in the quarter owing to solid revenue growth in all the three operating segments. Systemwide RevPAR grew 4.6% in the quarter. The increase reflects an 8.4% domestic increase. With the economy beginning to improve gradually, the U.S. hotel industry has started to grow. Wyndham is generating room-rate gains in the domestic upscale and midscale segments with an increase in occupancy. Growth in hotel demand is exceeding supply, thereby leaving scope for the company to raise its room rate, resulting in domestic RevPAR improvement.

Given the current scenario, Wyndham has raised its earnings guidance for 2014, for the second time in a row. The company now anticipates adjusted earnings per share within the range of $4.45 to $4.48 per share compared to the previous expectation of $4.34–$4.44. The current guidance is higher than the year-ago figure of $3.83 per share.

We believe that Wyndham's efforts and initiatives to boost traffic have resulted in a positive outlook for the company. In order to survive in the tough economic environment, Wyndham has devised new ways to increase traffic, which include organizing television and digital media campaigns to increase brand awareness while driving direct bookings. Also, the company is launching new prototype hotels that aim at enhancing the overall guest experience while reducing development costs for franchisees.

Overall, we believe a strong developmental pipeline, significant international exposure and Wyndham's transition to a growing fee-for-service-based business are expected to spur growth for this Zacks Rank #3 (Hold) stock.

Other Stocks to Consider

Some better-ranked stocks in the hotel industry include Choice Hotels International Inc. (CHH), Hilton Worldwide Holdings Inc. (HLT) and Intercontinental Hotels Group plc (IHG). All these stocks carry a Zacks Rank #2 (Buy).