Will Wyndham Worldwide (WYN) Keep the Earnings Streak Alive?

Wyndham Worldwide Corporation WYN is set to report second quarter 2014 results on Jul 24, 2014. Last quarter, it posted a positive earnings surprise of 4.0%. Let's see how things are shaping up for this announcement.

 

Factors to Consider this Quarter

 

Wyndham Worldwide beat earnings in three of the trailing four quarters, while comfortably surpassing the revenue estimates in all four.

 

The company seems to be quite optimistic of posting strong year-over-year earnings growth in the second quarter of 2014. It expects adjusted earnings per share in the range of $1.11 to $1.13 in the second quarter of 2014. The Zacks Consensus Estimate stands at $1.13, which is at the higher end of the guidance – reflecting bullish expectations for the quarter.

 

We believe that the company's efforts and initiatives to boost traffic resulted in a positive outlook. 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.

 

Moreover, the company is organizing podium presentations to effectively and efficiently introduce prospective owners to the benefits of its timeshare business that has solid long-term potential. The company expects these new tools to drive growth in the upcoming quarters.

 

However, like other leading hoteliers, lingering political uncertainty in Latin America and in some parts of Africa and an economic slowdown in China are expected to limit sales growth in the second quarter. Moreover, an uncertain political situation in Ukraine is expected to have a negative impact  on the economic sentiment in the Eurozone, thereby impacting the revenues of the company.

 

Earnings Whispers?

 

Our proven model does not conclusively show that Wyndham Worldwide is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below. 

 

Zacks ESP:  Both the Most Accurate estimate and the Zacks Consensus Estimate stand at $1.13. Hence, the difference is 0.00%.

 

Zacks Rank #2 (Buy): Wyndham Worldwide's Zacks Rank #2 when combined with a 0.00% ESP makes surprise prediction difficult. Note that the Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.

 

Stocks to Consider

 

Other stocks in the hotels and motels industry and broader consumer discretionary sector that have both a positive earnings ESP and a favorable Zacks Rank are:

 

Choice Hotels International Inc. CHH, with Earnings ESP of +2.04% and a Zacks Rank #2.

 

Pinnacle Entertainment Inc. PNK with Earnings ESP of +8.3% and a Zacks Rank #2.

 

Penn National Gaming Inc. PENN with Earnings ESP of +14.3% and a Zacks Rank #3 (Hold).