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Why Is Wyndham (WYN) Down 4.4% Since the Last Earnings Report?

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It has been more than a month since the last earnings report for Wyndham Worldwide Corp (WYN - Free Report) . Shares have lost about 4.4% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Wyndham Beats on Q2 Earnings & Sales

Wyndham reported strong second-quarter 2017 results wherein both earnings and revenues surpassed the Zacks Consensus Estimate.

Earnings and Revenue Discussion

Adjusted earnings of $1.53 per share beat the Zacks Consensus Estimate of $1.50 by 2%. Also, earnings were up 9.3% year over year on the back of higher revenues as well as the company’s share repurchase program.      
 
Additionally, net revenues of $1.48 billion improved 5.4% year over year on the back of increased contribution from all of its segments. Moreover, revenues outpaced the Zacks Consensus Estimate of $1.47 billion .

Inside the Headline Numbers

Adjusted EBITDA (excluding share-based compensation expenses) increased 2.9% year over year to $350 million.

Notably, Wyndham has been functioning through its three operating segments: Hotel Group, Destination Network (formerly known as Vacation Exchange and Rentals) and Vacation Ownership.

Hotel Group revenues were $345 million, up 3.3% from the year-ago figure, which reflected higher franchise fees as well as growth in the company's Wyndham Rewards credit card program.

Domestic same store RevPAR improved 2.8%. At constant currency, global system-wide same store RevPAR increased 3.3% year over year.

Adjusted EBITDA increased 5% to $106 million. On a currency-neutral basis adjusted EBITDA grew 6%.

Revenues at Destination Network were $405 million, an increase of 5% from the year-ago figure.

Exchange revenues remained flat year over year at $159 million. In fact, the figure grew 1% at constant currency, as the exchange revenue per member rose 2.4%, and average number of members declined 1.7%.

Vacation rental revenues were $220 million, reflecting 8.9% year-over-year growth. Likewise, at constant currency and excluding acquisitions, vacation rental revenues increased 9% driven by a 7.8% increase in transaction volumes and a 0.9% increase in average net price per rental.

Adjusted EBITDA increased 5% to $89 million, reflecting stronger performance in vacation rental brands. On a currency-neutral basis, adjusted EBITDA increased 6%.

Revenues at Vacation Ownership increased 6% year over year to $750 million. The uptick reflects an increase in gross VOI sales as well as higher consumer financing revenues, partially offset by a higher provision for loan losses.

Gross VOI sales in the second quarter increased 9% year over year. Meanwhile, tour flow was up 10.3% but volume per guest (VPG) was down 1.1%, primarily reflecting a 14% increase in sales to new owners in North America, which produce a lower VPG.

Adjusted EBITDA decreased 2% to $183 million as the increase in revenues was offset by higher legal expenses and the absence of a $4 million benefit from business interruption insurance claims received in the prior-year quarter.

2017 Guidance

For 2017, the company continues to project adjusted net income in the range of $631 million to $652 million. However, adjusted earnings per share are anticipated in a band of $6.04 to $6.24, higher than the previously expected range of $5.98 to $6.18 per share. This, in turn, reflects a lower share count due share due to possible share repurchases. The Zacks Consensus Estimate for 2017 earnings is currently pegged at $6.22 per share.

Wyndham continues to expect full-year revenues to roughly come in the range of $5.80–$5.95 billion. Adjusted EBITDA is still projected to be approximately in a band of $1.41 billion to $1.44 billion.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last month as none of them issued any earnings estimate revisions.

Wyndham Worldwide Corp Price and Consensus

VGM Scores

At this time, Wyndham's stock has a nice Growth Score of B, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A . If you aren't focused on one strategy, this score is the one you should be interested in.

Zacks' style scores indicate that the company's stock is equally suitable for value, momentum and growth investors.

Outlook

The stock has a Zacks Rank #3 (Hold). We expect in-line returns from the stock in the next few months.




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