Earnings Preview: Wyndham Worldwide Corp.

Wyndham Worldwide Corp. (WYN) is expected to report Q4 earnings Tuesday with a conference call scheduled for 8:30 a.m. ET.

Guidance

Analysts are looking for a profit of 46c on revenue of $1.07B. The consensus is 44c to 47c for EPS, and revenue of $1.10B to $1.05B, according to First Call. In December, the company said it expects 2007 EPS of $2.02 to $2.13 on revenue of $4.34B to $4.45B vs. First Call consensus of $2.11 and $4.39B. Also, it sees 2008 EPS of $2.23 to $2.38 on revenue of $4.8B to $4.9B vs. First Call consensus of $2.31 and $4.85B. Wyndham said it expects Q1 EPS of 30c to 35c vs. First Call consensus of 34c.

While the lodging sector has enjoyed steady growth on demand, and limited construction of new hotels, growth rates have now slowed due to the softening U.S. economy and increased hotel supply. Wyndham believes it is well positioned because of its businesses that appeal to retirement-age Americans who have more time and money to spend on hotel rooms. The company expects its bargain hotel chains to be more stable during an economic downturn, as travelers look to save money.

Analyst Views

Goldman Sachs expects Q4 results for lodging stocks to be "toward the lower end of expectations" with little potential for upside surprises, and expects companies to broadly lower 2008 guidance. Declining fundamental sector drivers, including decelerating demand and increasing supply growth, coupled with challenging capital markets and increasing concerns of a U.S. recession, could weigh on the shares. They believe Wyndham is less exposed to business travel, and is in the midst of a multi-year turnaround, which could result in potential upside. Goldman expects that Wyndham will better weather the weakening economy than its competitors since a significant amount of their profits are not dependent on hotel-level profitability.

Comments

[Dr. Thomas E. Martin III, PhD]

Dear BOD,

I am concerned about the Wyndham declining stock price and the employee turnover in the Wyndham Worldwide Vacation ownership marketing and sales departments. Over the last year, the average length of employment has been four months. Since an employee's first two months are spent learning the product and service, we only benefit from an average of two months of steady work. Clearly, we must find a solution to this problem. As time moves forward, Inflation and Inducement costs put a major strain on the Wyndham company general assets.

First of all, I suggest that when interviewing applicants, recruiters be very specific about the type of commitment we expect from our employees. Let the applicants know that we only want to hire those who can make at least a one-year commitment to the company. Also, perhaps we should consider how stable an applicant's employment history has been. Secondly, I would consider a “3,5,7 yr vesting schedule” inside the Wyndham 401K, which in turn would provide golden handcuffs on key producers as well as reduce the future inducement cost, etc. Lastly, I would introduce 21st century comprehensive planning tools into the Wyndham vacation ownership employee marketing and sales training classes. Please contact me @[e-mail] for more detail.




Sincerely,


Thomas E. Martin III, PhD
Martin Consulting

[Dr. Thomas E. Martin III, PhD]

I am concerned about the Wyndham declining stock price and the employee turnover in the Wyndham Worldwide Vacation ownership marketing and sales departments. Over the last year, the average length of employment has been four months. Since an employee's first two months are spent learning the product and service, we only benefit from an average of two months of steady work. Clearly, we must find a solution to this problem. As time moves forward, Inflation and Inducement costs put a major strain on the company general assets.

First of all, I suggest that when interviewing applicants, Wyndham recruiters be very specific about the type of commitment we expect from our employees. Let the applicants know that we only want to hire those who can make at least a one-year commitment to the company. Also, perhaps we should consider how stable an applicant's employment history has been. Secondly, I would consider a “3,5,7 yr vesting schedule” inside the Wyndham 401K, which in turn would provide golden handcuffs on key producers as well as reduce the future inducement cost, etc. Lastly, I would introduce 21st century comprehensive planning tools into the Wyndham vacation ownership employee training classes. Please contact me @ [e-mail] for more detail.

Sincerely,

Thomas E. Martin III, PhD
Martin Consulting