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Why Is TripAdvisor (TRIP) Down 7.4% Since Last Earnings Report?

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A month has gone by since the last earnings report for TripAdvisor (TRIP - Free Report) . Shares have lost about 7.4% 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 Beats Q1 Earnings Estimates, Lags Revenues

TripAdvisor Inc. reported adjusted first-quarter 2019 earnings of 36 cents per share, exceeding the Zacks Consensus Estimate by 5 cents. The reported earnings increased 33.3% sequentially and 20% from the year-ago quarter.

Revenues in the first quarter were $376 million, missing the Zacks Consensus Estimate of $384 million. The top line was down 1% year over year.

Revenue Segments

Starting first quarter 2019, TripAdvisor revised its reporting structure into three segments: Hotels, Media & Platform, Experiences & Dining, and Other.

Revenues of $254 million (accounting for 68% of its total revenues) from the Hotels, Media & Platform segment remained flat from the year-ago quarter.

Revenues of $80 million from the Experiences & Dining segment increased 29% year over year and contributed 21% of its total revenues. The company will likely continue to invest in supply and marketing to accelerate E&D products and drive attractive returns over the long run.

The Other segment contributed the remaining 11%. Revenues under this segment include revenues from rentals, SmarterTravel, Flights/Cruise, and TripAdvisor China. Revenues in this segment were $42 million, down 33% from the year-ago quarter, primarily due to the elimination of some marginal and unprofitable revenue within some non-TripAdvisor branded offerings.

Important Metrics

Average monthly unique visitors fell 5% from the prior-year quarter to approximately 411 million.

User reviews on the company’s website reached 760 million, representing year over year growth of over 20%. The increase was driven by strong efforts toward improving the user base through marketing initiatives and enhancing mobile-centric product designs. 

Operating Results

TripAdvisor’s adjusted operating expenses of $293 million were down 2.2% from $307 million a year ago. Per the press release, operating margin of 8.2% was up 210 basis points from the year ago-quarter.

On a GAAP basis, the company’s net income was $26 million or 18 cents per share versus net loss of $5 million or 4 cents in the prior-year quarter.

Balance Sheet & Cash Flow

TripAdvisor exited the quarter with cash, cash equivalents and short-term investments of roughly $811 million, up from $670 million recorded in the last reported quarter. Accounts receivables were $236 million, up from $212 million in the third quarter.

Cash flow from operations was $182 million, increasing from $31 million in the last reported quarter. Capex was $17 million, up from $16 million in the fourth quarter.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

Currently, TripAdvisor has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Following the exact same course, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions looks promising. Notably, TripAdvisor has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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