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Wyndham (WYN): Long-Term Prospects Bright, Risks Prevail

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On Jun 15, we issued an updated research report on Wyndham Worldwide Corporation .

Wyndham posted mixed results for the first quarter of 2016, wherein earnings beat the Zacks Consensus Estimate but revenues missed the same. Going forward, the company’s strong developmental pipeline, continued expansion plans, significant international exposure and strong marketing efforts should boost top and bottom-line growth.

Scope

Wyndham boasts a significant presence in most of the hospitality markets in the U.S. and abroad. A gradual recovery in the U.S. economy is driving the hotel industry. Wyndham is generating room-rate gains in the domestic upscale and midscale segments with an increase in occupancy. The strong demand witnessed in 2015 is expected to continue to raise pricing in 2016 and beyond.

Wyndham has also unveiled a global transformation program of repositioning and revitalizing its 16 economy, midscale and upscale brands to cater to the needs of travelers. With this plan, the company intends to drive the democratization of travel and enhance the travel experience for millennials and the global middle class, which should enhance the company’s growth prospects.

Moreover, Wyndham is consistently trying to expand 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, thus enhancing its business.

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

Risks

However, owing to international expansion, the company is exposed to headwinds in the regions where it operates and fluctuations in exchange rates.

Lingering political uncertainty in Brazil and Africa, macroeconomic headwinds in Venezuela and an economic slowdown in China may keep revenues under pressure. The sluggish pace of economic recovery in Europe has also been hurting the company’s business.

Moreover, 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 Starwood Hotels & Resorts Worldwide Inc. , Intrawest Resorts Holdings, Inc. (SNOW - Free Report) and Belmond Ltd. . All the three stocks sport a Zacks Rank #1 (Strong Buy).

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