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Wyndham (WYN) to Report Q2 Earnings: Another Beat in Store?

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Wyndham Worldwide Corporation is scheduled to report second-quarter 2017 numbers on Aug 3, before market opens. We expect the company to surpass expectations.

Last quarter, the company came up with a positive earnings surprise of 2.70%. In fact, its earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, with an average beat of 2.64%.

Wyndham Worldwide Corp Price and EPS Surprise

Why a Likely Positive Surprise?

Our proven model shows that Wyndham is likely to beat on earnings because it has the perfect combination of the two key ingredients.

Zacks ESP: Wyndham has an Earnings ESP of +1.33% as the Most Accurate estimate is $1.53 while the Zacks Consensus Estimate is pegged at $1.51. This is a meaningful indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Wyndham currently has a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings estimates.

Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.

The combination of Wyndham’s favorable Zacks Rank and positive Earnings ESP makes us reasonably confident of an earnings beat.

Factors at Play

Wyndham’s diversified product portfolio, prudent acquisitions and robust marketing efforts are expected to drive earnings in the to-be-reported quarter. In fact, last December, the company acquired Latin America's leading Fen Hotels while the company’s Vacation Rentals entered into a strategic partnership with Unique Ventures (Veeve). Both these deals are expected to boost sales considerably as they add to the company’s international presence.

Meanwhile, increasing business and leisure travel on the back of an improving economy and positive employment numbers, along with higher transaction volumes should also boost the quarter’s results.

Furthermore, Wyndham’s robust vacation ownership or timeshare business is one of the fastest evolving and profitable sectors in the hospitality industry and is likely to further propel second-quarter performance. Also, its attractive Loyalty and Rewards Program along with other strategic initiatives undertaken are expected to increase occupancy.

However, lingering uncertainty in various economies like Europe, Brazil and Africa might limit revenue growth. Also, soft demand in oil producing regions is likely to hurt revenue per available room (RevPAR) in the to-be-reported quarter. Consumer concerns related to pandemic virus like Zika may somewhat temper growth in the Caribbean region too.

Moreover, given Wyndham’s considerable international operations, negative currency translation might continue hampering the company’s results as it has been doing over the last few quarters.

Notably, though the new owner strategy is expected to benefit Wyndham’s timeshare business in the long run, it is expected to weigh on the company’s revenues and EBITDA (earnings before interest, tax, depreciation and amortization) in the to-be-reported quarter.

Stocks to Consider

Wyndham is not the only company looking up this earnings season. Here are some other companies in the Consumer Discretionary sector to consider as our model shows they also have the right combination of elements to post an earnings beat this quarter:

Time Warner Inc. has an Earnings ESP of +1.68% and a Zacks Rank #2.

Norwegian Cruise Line Holdings Ltd. (NCLH - Free Report) has an Earnings ESP of +1.03% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

AMC Networks Inc. (AMCX - Free Report) has an Earnings ESP of +1.42% and a Zacks Rank #3.

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