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TripAdvisor (TRIP) Q4 Earnings & Revenues Miss Estimates

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TripAdvisor Inc. (TRIP - Free Report) reported adjusted fourth-quarter 2016 earnings of 5 cents per share, missing the Zacks Consensus Estimate by 13 cents. Adjusted earnings exclude one-time items but include stock-based compensation expense.

The decrease was due to lower display advertising and subscription revenues. Management stated that the instant booking rollout led to significant revenue headwinds in 2016, muting revenue growth, thereby impacting profitability.

Shares of the online travel research company were down more than 5% in response to the weak fourth-quarter results.

Over the past one year, shares of TripAdvisor underperformed the Zacks categorized Electronic Commerce industry. While the industry gained 50.25%, the stock incurred a loss of 20.56%.

Revenues

TripAdvisor reported revenues of $316.0 million in the fourth quarter, down 24.9% sequentially but up 2.3% year over year. The sequential decrease was due to some softness in display and subscription revenues. Also, revenues missed the Zacks Consensus Estimate of $326 million.

Earlier, TripAdvisor had changed its reportable segments to reflect changes in management’s reporting structure. The new segments are Hotel and Other.

Revenues of $252.0 million from the Hotel segment were down 21% sequentially and 3% from the year-ago quarter but made up 80% of total revenue. This segment includes click, display, subscription and transaction-based revenues from hotels, air and cruise, including that from the company’s largest subsidiary, SmarterTravel, as well as from operations in China.

Revenues of $64.0 million from the Other segment decreased 37% sequentially but increased 31% year over year and contributed the remaining 20% of the total revenue. This segment includes revenues from attractions, restaurants and vacation rentals businesses.

Revenues by Source

Revenues of $154.0 million from Click-based advertising were flat from the year-ago quarter and accounted for 49% of total revenue. Revenues from Display-based advertising decreased 3% year over year to $69.0 million and brought home 22% of total revenue. The other hotel revenue component was $29 million, down 17% year over year and accounted for 9% of total revenue. Non-Hotel revenue component contributed the remaining 20%, accounting for $64 million in revenues, up 31% year over year.

Operating Results

TripAdvisor’s adjusted operating expenses of $290 million decreased 13.7% sequentially and 9.9% year over year. The adjusted operating margin of 5.7% was down significantly on a sequential as well as year-over-year basis.

On a GAAP basis, TripAdvisor recorded a net profit of $1 million or 1 cent per share, down from the year-ago figure of $3 million or 2 cents.

Pro forma earnings fell to 5 cents per share from 36 cents in fourth-quarter 2016

Balance Sheet & Cash Flow

TripAdvisor exited the quarter with cash, cash equivalents and short-term investments of roughly $730.0 million, slightly up from $727 million in the prior quarter. Accounts receivables were $189 million, down from $221 million in the last quarter.

Long-term debt was $91 million in the fourth quarter compared with $20 million in the previous quarter.

Cash flow from operations was $46.million, significantly up from ($87) million in the previous quarter. Capex was $16 million, down from $21 million in the third quarter. Free cash flow was $30 million, significantly up from ($108) million in the previous quarter.

During the quarter, the company repurchased 1,651,957 shares for approximately $84 million. The share repurchase program authorized by the Board of Directors in February 2013 has been completed.

Our Take

TripAdvisor is an online travel research company that features reviews and advice on hotels, resorts, flights, vacation rentals, vacation packages and travel guides, to name a few. The company reported a weak fourth quarter with both the top line and the bottom line missing our estimates.

The company’s solid fundamentals, growth initiatives, partnerships to boost hotel bookings, strong focus on developing its mobile products, expansion into the international restaurant reservation space and improvement in user growth and engagement, especially related to mobile devices will help the company achieve desired results.

Additionally, TripAdvisor’s acquisitions complement its travel product portfolio. These also improve efficiency and expand user base, on the one hand, while increasing traffic, hotel shoppers and profits, on the other. Over the long term, the company is well positioned to grow, given its expanding user base, improving margins and increasing monetization of social and mobile platforms.

However, mounting expenses due to new initiatives and investments are hurting the company’s profits. Also, lack of visibility and intensifying competition from Priceline , Expedia (EXPE - Free Report) and Alphabet (GOOGL - Free Report) remain the future growth concerns.

TripAdvisor, Inc. Price, Consensus and EPS Surprise

 

TripAdvisor, Inc. Price, Consensus and EPS Surprise | TripAdvisor, Inc. Quote

Currently, TripAdvisor has a Zacks Rank #4 (Sell).

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