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Sabre (SABR) Q2 Earnings and Revenues Top Estimates, Up Y/Y

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Sabre Corporation (SABR - Free Report) reported adjusted earnings per share of 37 cents for second-quarter of 2018 that increased 5.7% on a year-over-year basis and surpassed the Zacks Consensus Estimate of 35 cents.

Revenues came in at $984.4 million, up 9.3% from the year-ago quarter, and topped the Zacks Consensus Estimate of $947 million.

A supportive macro global environment marked by cost reduction and Sabre’s business alignment program that kicked off in August last year aided second-quarter results. However, increase in technology costs was an overhang on margins.

Revenue Details

Travel Network revenues increased 13.2% year over year to $719.7 million. The growth was backed by 7.6% increase in global bookings during the quarter. New business wins and conversions backed results.

In Asia Pacific, bookings grew around 23.5% backed by strong market growth and completion of the Flight Centre agency conversion. Bookings in North America and EMEA increased 5% each driven by large global travel management companies. However, unfavorable economic factors  resulted in a 1.4% decline in Latin American bookings.

Airline Solutions revenues for the quarter came in at $204.68 million, marking a decline of 2.4% from the year-ago quarter. Implementation of new revenue recognition standard led to a low-single digit decline in AirVision and AirCentre commercial and operations solutions revenues.

Revenues at SabreSonic Passenger Reservation System declined in low single digits due to the termination of Southwest Airlines’ legacy reservations system services.

Hospitality Solutions revenues driven by Central Reservation System (CRS) were up 10.4% year over year to $68.3 million. The completion of SynXis CRS implementation at Wyndham drove teens growth in the SynXis (CRS) software and service revenue line.

Sabre Corporation Price, Consensus and EPS Surprise

Sabre Corporation Price, Consensus and EPS Surprise | Sabre Corporation Quote

Margin Details

Adjusted gross profit came in at $373.7 million, up 1.4% from the year-ago quarter. Adjusted gross margin however declined 300 basis points (bps) to 37.9%.

Adjusted operating income decreased 60.3% to $172 million due to increased technology costs for cloud transition and other expenses. Adjusted operating margin of 17.5% was down 170 bps.

Adjusted operating income for the Travel Network increased 6.9% on the back of strong revenue growth as well as cost reduction and business alignment program benefits. However, increase in incentive related expenses, technology costs, depreciation and amortization were a dampener.
   
Adjusted operating income for Airline Solutions decreased 35.3% owing to the de-migration of Southwest Airlines among others. Moreover, headcount-related expenses resulted in a 10.4% decline in adjusted operating income of Hospitality Solutions.
 
Balance Sheet and Cash Flow

Sabre ended the quarter with cash and cash equivalents of $370 million compared with $361.1 million in the previous quarter.

Cash flow from operations was $146.6 million and free cash flow was $79.5 million in the second quarter.

The company paid $38.5 million during the quarter in the form of dividends and $26.3 million for share repurchases.
   
Guidance

Sabre reiterated its full-year 2018 guidance. Revenues are expected to be in the range of $3.76 billion to $3.84 billion, indicating 4% to 7% growth.

Adjusted operating income is expected to be between $665 million and $705 million. Adjusted earnings per share are anticipated to be in the range of $1.39 to $1.53.

Zacks Rank and Stocks to Consider

Sabre currently carries a Zacks Rank #2 (Buy).

A few other top-ranked stocks in the broader technology sector are YY Inc. (YY - Free Report) , Science Applications (SAIC - Free Report) and Verint Systems (VRNT - Free Report) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth for YY, Science Applications and Verint is projected to be 26.4%, 5% and 10%, respectively.

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