Wyndham (WYN) Eyes Long-Term Growth Despite Risks

On Aug 30, we issued an updated research report on hospitality company, Wyndham Worldwide Corporation (NYSE:WYN) .

Wyndham posted mixed results for second-quarter 2016 on Jul 27, wherein earnings beat the Zacks Consensus Estimate while revenues missed the same.

Prospects

Wyndham boasts a significant presence in most of the hospitality markets in the U.S. and abroad.

With the improving economic environment in the U.S., the demand for hotels has started to grow. Notably, Wyndham is generating room-rate gains in the domestic upscale and midscale segments with an increase in occupancy. The strong demand witnessed in 2015 and in the first half of 2016, is likely to increase pricing power in the rest of 2016 and beyond.

Moreover, Wyndham is consistently trying to augment its presence worldwide and has expansion plans for the Asia Pacific, Europe, Middle East, Africa and Indian Ocean (EMEAI) region. Expansion in these lucrative markets should help the company gain market share in the hospitality industry.

Additionally, the company’s robust vacation ownership business – which is gaining popularity among millennials of late – should continue to boost revenues. Also, Wyndham Loyalty and Rewards Program coupled with other initiatives to increase occupancy should drive growth.

Thus, going forward, the company’s strong developmental pipeline, continued expansion plans, significant international exposure and strong marketing efforts should bring top and bottom-line growth.

Concerns

However, despite the weakening of the U.S. dollar against major foreign currencies in the recent past, negative currency translation is a concern for Wyndham as it has considerable international operations.

Moreover, a sluggish economy in Brazil, uncertainty in Africa, macroeconomic headwinds in Venezuela and an economic slowdown in China may keep revenues under pressure. Also, Wyndham has a significant number of vacation rental properties in Europe, where the economic/political conditions are expected to be challenging post Bexit.

Further, the company expects soft demand in the oil producing regions, which mainly include parts of Texas, Louisiana, Oklahoma and West Virginia, to continue to hurt RevPAR.

Zacks Rank & Stocks to Consider

Wyndham currently has a Zacks Rank #3 (Hold). Better-ranked stocks in this sector include Marriott Vacations Worldwide Corp. (NASDAQ:VA) C), Diamond Resorts International, Inc. (NYSE:DRII) and Pool Corp. (NASDAQ:POOL) . All the three stocks carry a Zacks Rank #2 (Buy).

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