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Tracey Ryniec

Wyndham Worldwide Corporation

WYN

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Wyndham Worldwide Corporation (WYN - Analyst Report) continues to bank on growth in the travel industry. This Zacks #1 Rank (strong buy) is expected to see double digit earnings growth in 2011 yet it trades at just 12.9x forward estimates. That gives it the magical combination of being both a value and a growth stock.

Wyndham Worldwide is a hospitality company that operates 55 brands worldwide, including Wyndham Hotels and Resorts, Ramada, Days Inn, Super 8, and English Country Cottages.

The company operates about 7,380 franchised hotels and vacation ownership resorts with about 633,700 rooms worldwide.

It also operates Wyndham Exchange & Rentals, which has 3.8 million members who have access to 97,000 vacation properties in 100 countries and a vacation ownership business, which markets and sells vacation ownership interests at resorts.

Wyndham's Amazing Earnings Surprise Streak Continued

On July 27, Wyndham reported its second quarter results and surprised on the Zacks Consensus by 14.3%.

It was the 20th consecutive earnings surprise. The company hasn't missed since 2006. Very few companies can match this record, especially with the Great Recession right in the middle of the streak.

Earnings per share rose 25% to 64 cents from 51 cents made in the year ago quarter. The consensus called for just 56 cents.

Revenue rose 13% to $1.1 billion as all 3 segments saw growth in the quarter. It saw strong RevPAR growth of 9.7% in the hotel business, which saw revenue climb 7% to $190 million.

Vacation Ownership Interest (VOI) is the company's largest segment. Sales rose 11% to $412 million compared with the second quarter of 2010 due to a 9% increase in tour flow and a 3% increase in volume per guest.

Vacation Exchange and Rentals also saw a gain, with revenue rising 28% to $361 million mainly due to acquisitions and favorable impact from foreign currency.

There was a 5% increase in the average net price per vacation rental which was only partially offset by a 1% decline in rental transaction volume.

Raised Full Year Guidance

In July, the company was still bullish about the remainder of the year.

It raised EPS guidance to the range of $2.32 to $2.40 from its prior guidance of $2.15 to $2.25.

Revenue is also expected to rise to $4.2 billion to $4.3 billion from the previous range $4.0 to $4.2 billion.

Zacks Consensus Estimate Rises

Not surprisingly, given the upward revision in the full year guidance, the analysts all moved to match the new guidance range.

The 2011 Zacks Consensus Estimate jumped to $2.38 from $2.26 per share since the earnings report. This is at the high end of the company's guidance range.

It is also earnings growth of 19.3% as the company made just $2.00 in 2010.

Increased Share Repurchase Program

On Aug 11, Wyndham announced that it was increasing its share repurchase program by $500 million as it remained confident in the business model and free cash flow generation.

As of Aug 11, the company had repurchased 4.7 million shares for $141 million.

It now has about $755 million left on in its share repurchase program.

Valuation Still Looks Attractive

Shares have pulled back in the recent stock market sell off which has cooled an incredible 2-year rally.

In addition to a P/E under 15, which is usually what I use as a cut-off for value stocks, the company also has a price-to-book ratio of 2. A P/B under 3.0 usually indicates value.

Along with the share repurchase program, Wyndham pays a dividend which yields 2%. It also has a solid 1-year return on equity of 14.2%.

With 19% growth expected in 2011 and a P/E of just 12.9, Wyndham Worldwide is one of those rare stocks that has the magical combination of both value and growth.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Turnaround Trader and Insider Trader services. You can follow her at twitter.com/traceyryniec.

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