It has been about a month since the last earnings report for TripAdvisor (TRIP - Free Report) . Shares have lost about 4.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is TripAdvisor 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.
TripAdvisor Tops Q3 Earnings Estimates, Lags Revenues
TripAdvisor Inc. reported adjusted third-quarter 2018 earnings of 72 cents per share, surpassing the Zacks Consensus Estimate by 25 cents. Also, earnings increased 75.6% sequentially and 100% from the year-ago quarter.
Revenues in the third quarter were $458 million, lagging the Zacks Consensus Estimate of $468 million. However, quarterly revenues were up 4.3% year over year.
TripAdvisor reports revenues under two segments: Hotel and Other.
Revenues of $305 million (accounting for 67% of its total revenues) from the Hotel segment decreased 2% from the year-ago quarter. This segment includes click, display, subscription and transaction-based revenues from hotels, air and cruise, and also comprise sales from the company’s largest subsidiary, SmarterTravel, as well as operations in China.
Revenues of $153 million from the Non-Hotel segment increased 20% year over year and contributed the remaining 33% of its total revenues. This segment includes revenues from attractions, restaurants and vacation rental businesses.
Revenues by Source
Revenues of $194 million (accounting for 42% of the total revenues) from Click-based and transaction decreased 1% from the year-ago quarter. Revenues from Display-based advertising increased 7% year over year to $81 million and brought home 18% of the total revenues. The other hotel revenue component contributed $30 million, down 27% from the year-ago quarter.
Average monthly unique visitors grew 8% from the prior-year quarter to approximately 490 million.
Average monthly unique hotel shoppers decreased 5% year over year to approximately 160 million.
TripAdvisor’s adjusted operating expenses of $318 million were down 9.1% from $350 million a year ago. Per the press release, operating margin of 19.4% was up 980 basis points from the year ago-quarter.
On a GAAP basis, the company’s net income was $69 million or 49 cents per share compared with $25 million or 18 cents in the prior-year quarter.
Balance Sheet & Cash Flow
TripAdvisor exited the quarter with cash, cash equivalents and short-term investments of roughly $663 million, down from $678 million recorded in the last reported quarter. Accounts receivables were $237 million, down from $300 million in the second quarter.
Cash flow from operations was $14 million, decreasing from $186 million in the last reported quarter. Capex was $15 million, down from $16 million in the second quarter.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 67.9% due to these changes.
Currently, TripAdvisor has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise TripAdvisor has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.