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Expedia Inc. (EXPE - Analyst Report) is set to report second quarter 2013 results on Jul 25. Last quarter, it posted a 318% negative surprise. Let’s see how things are shaping up for this announcement.

Growth Factors This Past Quarter

Expedia’s earnings in the last quarter were 27 cents, short of the Zacks Consensus Estimate, due to weaker margins. The growing mix of international business negatively impacted gross margins. However, revenues were up sequentially helped by a stronger travel market all over the world, contributions from VIA and Trivago and strategic expansion in Asia.

We believe Expedia’s growth in Asia (much lower ADRs and revenue per room night) remains much stronger than other regions and this will likely cast a negative impact on margins, while driving up volumes.

Earnings Whispers?

The Zacks Consensus Estimate for the second quarter stands at 70 cents per share while that for fiscal 2013 stands at $2.52.

Expedia has missed estimates once in the last four quarters, while beating estimates three times.

There have been no estimate revisions in the last 30 days. As a result, the Zacks Consensus Estimate for the second quarter as well as for 2013 has remained unchanged during this time period. The stock carries a Zacks Rank #2 (Buy).

We caution against stocks with Zacks Ranks #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Our model states that astock needs to have both a positive earnings expected surprise prediction or ESP (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank #1, #2 or #3 to beat earnings estimates. You could, therefore, consider the following stocks instead: 

  • Syntel Inc. (SYNT - Snapshot Report), with an ESP of +0.82% and a Zacks Rank #1 (Strong Buy)
  • InvenSense Inc. (INVN - Snapshot Report), Earnings ESP of +8.33% and a Zacks Rank #2 (Buy)
  • Scientific Games Corp. (SGMS - Analyst Report), with an ESP of +100.0% and a Zacks Rank #3 (Hold)

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