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Expedia Prices $1.25B Senior Notes, Gets Moody's Baa3 Rating

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Expedia Inc. (EXPE - Free Report) recently announced a private offering of senior unsecured notes aggregating $1.25 billion. This offering is expected to close on Sep 19, 2019, subject to customary closing conditions.

These bonds carry a coupon rate of 3.25% and are due to mature in 2030. Additionally, these notes will be issued at a price of 99.225% of the principal amount and guaranteed by certain subsidiaries of Expedia.

The online travel booking company stated that the transaction proceeds will be used for general corporate purposes that may include repayment, prepayment, redemption or repurchase of Expedia's debt. The fund can also be used for capital expenditures, acquisitions, dividend payouts, stock repurchases or other investment purposes.

Expedia Group, Inc. Price and Consensus

 

Cash Position

As of Jun 30, 2019, cash and short-term investments totaled $4.26 billion, up from $3.71 billion on Mar 31, 2019.

Expedia generated $1.14 billion cash from operations during the last reported quarter, down from $2.15 billion in the prior quarter. It also generated free cash flow of $839 million. Additionally, the company paid out quarterly dividend worth $48 million (32 cents per share) during the quarter.

We believe that the company has a strong balance sheet, which will help it to capitalize on investment opportunities and pursue strategic acquisitions, further improving prospects.

In our view, the senior notes’ offering will bring down the company’s cost of capital, in turn strengthening the balance sheet and supporting growth.

Moody's Rating

Leading credit rating agency Moody's assigned a Baa3 rating and positive outlook to Expedia.

The rating has been assigned based on its optimism on Expedia’s sustained strong operating performance in the online travel market for the coming years. The rating agency believes that the company will continue to benefit from leading domestic position in the growing online travel agency market. Moreover, it expects profitability to improve over the long term, driven by cloud technologies and strong growth in business.

Moody’s assigned a positive outlook on the rating, based on its belief that Expedia will exhibit a high single-digit annual organic revenue growth rate in constant currency in the near term. In addition, it expects free cash flow generation of more than $900 million and robust cash balances, allowing share buybacks in the near future.

Zacks Rank & Stocks to Consider

Currently, Expedia has a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader technology sector include Alphabet Inc. (GOOGL - Free Report) , Itron, Inc. (ITRI - Free Report) and MACOM Technology Solutions Holdings, Inc. (MTSI - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth for Alphabet, Itron and MACOM Technology is currently projected at 17.5%, 25% and 15%, respectively.

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