Wyndham Needs to Meet Earnings Expectations to Book the Attention of Investors
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Wyndham Hotels & Resorts (NYSE:WH) has been a recovery stock winner. In the last 12 months, WH stock is up 66% and through the first half of 2021, it’s up nearly 20% (19.88 as of this writing). However, the travel and tourism sector continues to face a couple of notable headwinds.
First, business travel is not yet back. And to be fair, nobody is altogether sure when, or if, it will get back to pre-pandemic highs. That’s not being hyperbolic. I understand there are many American workers who are enthusiastically waiting to travel for business (I count several of them in my personal network). However, many Americans are deciding what the next leg of their career journey will look like. For many, that may be a future that includes more remote work.
Second, the Delta variant of the novel coronavirus is delaying the return of international travel. And Wyndham noted that its revenue generated per available room (RevPar) was down 40% internationally compared to a 28% decline domestically.
Wyndham Services Both Kinds of Travelers
There are times when being a “jack of all trades” works to the detriment of a company, and a stock. This is not one of those times. The Wyndham portfolio consists of a network of budget to mid-level properties. While the company may still have a while to wait on business travel, it is likely to benefit from the pent-up demand of individuals and families who want to travel, but who may still be keeping one eye on the budget.
And Wyndham has a global footprint. So as cross-border travel picks up the company will see a benefit from that as well.
A Strong Balance Sheet
Despite the pandemic, Wyndham Hotels & Resorts managed to remain profitable in 2020. And the company posted a total shareholder return of 60% last year.
And although it did slash its dividend as a way to manage costs, the company raised its dividend by 8 cents in February, bringing it up to 16 cents per share. While that is 50% below pre-pandemic levels, it was an aggressive increase. Mature companies, such as Wyndham, raise their dividends for one reason an expectation of growth.
That is a premise that is being challenged as some analysts believe that Wyndham is prioritizing its dividend over earnings growth. That will be something for investors to watch, particularly given the fact that Wyndham sports a mixed bag in terms of fundamentals.
Analysts Love Wyndham Stock
Wyndham is covered by 12 analysts, and all the analysts give the stock a buy rating. The consensus price target for the stock suggests that WH stock may have peaked. However, since the company reported earnings in April, five analysts have upgraded their price targets. In each case, they give Wyndham a price target higher than its current level. And four of the five have price targets that are above the stock’s current 52-week high of $78.13.
Wait For Earnings to Provide Direction
Wyndham stock is moving towards oversold territory on higher than average volume. However, in the last 12 months, WH stock has been in a consistent pattern of rising prices. The 20-day simple moving average (SMA) recently crossed below the 50-day SMA. Although both averages are well above the 200-day SMA, you’d ideally like to see the 20-day move ahead of the 50-day before taking a position, particularly since the stock is trading near its 52-week high.
Earnings season can provide that kind of catalyst. Last quarter, Wyndham missed on revenue, but delivered a beat on earnings. Analysts are setting a high bar. At a consensus EPS of 62 cents, they are essentially forecasting that the hotel chain will be operating at “close to normal” conditions, at least in terms of recreational travel. If the company posts a beat, that may be the springboard for the next leg up.
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