Back to top

Image: Bigstock

Expedia (EXPE) Down 5.1% Since Last Earnings Report: Can It Rebound?

Read MoreHide Full Article

It has been about a month since the last earnings report for Expedia (EXPE - Free Report) . Shares have lost about 5.1% in that time frame, underperforming the S&P 500.

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

Expedia Beats on Q4 Earnings, Revenues Up Y/Y

Expedia Group delivered fourth-quarter 2018 adjusted earnings of $1.24 per share, surpassing the Zacks Consensus Estimate of $1.07. The figure also surged 49% on a year-over-year basis but declined 66% sequentially.

Revenues increased 10.3% year over year but declined 21.9% on a sequential basis to $2.56 billion. Notably, the figure outpaced the Zacks Consensus Estimate of $2.55 billion.

Year–over-year top-line growth was driven by robust performance of HomeAway, Brand Expedia and Expedia Partner Solutions. Further, growing stayed nights and expanding lodging portfolio continued to accelerate revenue generation.

Expedia recorded gross bookings of $21.96 billion in the fourth quarter, which came ahead of the Zacks Consensus Estimate of $21.73 billion. Moreover, the figure improved 11.1% year over year but declined 11.3% sequentially.

Revenues by Segment

Core OTA segment revenues (80.3% of total revenues) increased 10.6% year over year to $2.05 billion. The segment witnessed gross bookings of $17.9 billion, reflecting year-over-year growth of 11%. Robust growth in stayed room nights and increasing lodging revenues contributed well to this segment’s results.

Egencia revenues (6.1% of revenues) increased 13.1% on year-over-year basis to $155 million. This can be attributed to strong performance in quarterly bookings which came in $1.8 billion, up 10% from the prior-year quarter. The company’s growing investments in product portfolio expansion and customer services continued to accelerate revenues within this segment.

HomeAway (9% of revenues) generated $230 million in the fourth quarter, surging 20% from the year-ago quarter. HomeAway witnessed year-over-year growth of 15% in its gross bookings, which came in at $2.2 billion. Further, the segment experienced growth of 20% in the stayed property nights on a year-over-year basis.

Moreover, trivago revenues (7.4% of revenues) declined 11.6% year over year to $190 million.

Revenues by Business Model

Merchant model generated revenues of $1.39 billion (54.6% of revenues), up 8.6% year over year.

Agency division generated revenues of $699 million (27.3% of revenues), surging 11.1% from the prior-year quarter.

Advertising & Media yielded $233 million of revenues (9.1 % of revenues), advancing 8.9% from the year-ago quarter. This was primarily driven by robust Media Solutions business which exhibited strong year-over-year growth of 28% in the fourth quarter.

Moreover, HomeAway (9% of revenues) generated $230 million in the reported quarter, surging 20% from the year-ago quarter.

Revenues by Geography

Expedia generated $1.43 billion revenues (55.7% of total revenues) from domestic regions, up 13.6% from the prior-year quarter. This was primarily driven strong domestic room nights which grew 9% from the year-ago quarter.

Further, revenues generated by international regions were $1.14 billion (44.3% of revenues), up 6.4% on a year-over-year basis. Solid growth of 12% in room nights in international regions was a major positive during the reported quarter.

Revenues by Product Line

Lodging revenues (68.8% of total revenues) came in $1.76 billion, surged 10% from the prior-year quarter. This can be primarily attributed to year-over-year growth of 11% in stayed lodging room nights. Further, strong momentum in HomeAway, Expedia PartnerSolutions, Brand Expedia and Hotels.com drove lodging revenues.

Further, Expedia’s global lodging portfolio exceeded 1 million properties as of Dec 31, 2018.

Air revenues were $207 million (8.1% of revenues), up 18% year over year. This was driven by 10% increase in air tickets sold and 7% increase in revenues per ticket faring better than the airfare growth of 2%.

 

Operating Details

Adjusted EBITDA improved massively 17.2% year over year to $471 million. This can be attributed to rise in Egencia and Core OTA EBITDA which exhibited year-over-year growth of 65% and 9%, respectively.

Moreover, adjusted selling and marketing expenses were $1.2 billion, up 7% year over year.

Consequently, operating margin came in at 3.7%, contracting120 basis points (bps) from the year-ago quarter.

Balance Sheet & Cash Flow

As of Dec 31, 2018, cash and cash equivalents were $2.44 billion compared with $2.92 billion as of Sep 30, 2018. Short-term investments totaled $28 million, decreasing from $458 million in the previous quarter.

Further, Expedia’s free cash flow in the reported quarter was negative of $389 million which came down from the negative of $594 million in the third quarter.

Additionally, the company paid quarterly dividend worth $48 million (32 cents per share) during the reported quarter.

Guidance For 2019

Expedia expects adjusted EBITDA to witness growth within the range of 10-15% in 2019.

How Have Estimates Been Moving Since Then?

Fresh estimates followed a downward path over the past two months. The consensus estimate has shifted -10.73% due to these changes.

VGM Scores

Currently, Expedia has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

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

Outlook

Expedia has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Expedia Group, Inc. (EXPE) - free report >>

Published in