North America

Earnings Preview: Expedia Inc Q1 2017 (EXPE)

By: Craig Bowles

Overview

Expedia, Inc. (EXPE) is slated to report 1Q 2017 earnings after the bell on Thursday, April 27th. The earnings release is expected at approximately 4:00 p.m. ET followed at 4:30 p.m. with a webcast presentation available through Expedia Investor Relations. As one of the top global online travel agents, Expedia’s earnings could influence the direction of index futures and other broad market gauges.

expeP

Outliers & Strategy

Key measures:

  • Adjusted Earnings Per Share (EPS): The current Street estimate is $0.07 (range of $(0.15) to $0.34. (Source: Yahoo! Finance) Consensus was $0.35 three months ago.
  • Revenues: Analysts expect an increase of 12.4% y/y to $2.14 bln (range $2.07 bln to $2.19 bln).
  • Expedia shares trade at a Price/Book of 4.8 versus the 5-year average of 4.5; Price/Sales 2.3 vs 5-year average of 2.1; and Price/Cash Flow of 13.0 vs 5-year average of 11.1. Dividend yield of 0.8% compares to a 5-year average of 0.8%.
  • Analysts view Expedia with 19 Buy, 5 Hold, and 0 Sell ratings. (source: MarketBeat.com)
  • Insiders sold 170,028 shares over the last three months and sold 24,035,992 shares in the past year. (source: NASDAQ.com)  Buybacks had been running at $500 mln per year except for 2015’s $61 mln but picked back up in 2016. Buybacks pulled back was in 2007 in the face of economic worries.
  • Expedia, Priceline (PCLN) , and Alphabet (GOOGL) are the top global online travel agents. Results could also impact other online travel agents, such as Ctrip (CTRP), Travelzoo (TZOO) and TripAdvisor (TRIP).
  • Expedia shares have a 1-day average price change on earnings of 6.58%. Options are pricing in an implied move of 6.09% off earnings.

Recent News

  • 04/03: Barclays reiterated an Overweight rating on Expedia after the HomeAway tracker showed that the pace of the traveler fee roll out is trending ahead of expectations. However, based on the timing of revenue recognition (at time of stay, not time of booking), the analyst expects most of this benefit will be realized in 3Q, according to a post on StreetInsider.com.
  • 03/31: Pacific Crest expects HomeAway’s growth to give a much-needed boost to Expedia’s overall numbers despite competition fears from Airbnb, according to a post on Barron’s.com.
  • 03/22: Cantor Fitzgerald reiterated an Overweight rating on Expedia after checks show Q1 is trending in-line with expectations with limited impact from the Travel Ban. A slight sequential deceleration is likely due to the Easter shift into April, according to a post on StreetInsider.com.
  • 03/06: Macquarie upgraded Expedia to Outperform from Neutral citing reaccelerating hotel room night growth, and management has managed expectations for its HomeAway, according to a post on Barron’s.com.
  • 02/10: Expedia could see a growing threat from Google’s expanded travel business. Google already has a $12 billion travel business, compared to less than $9 billion for Expedia, according to a post on Barron’s.com.

Technical Review

Expedia made an all-time high of $140.51 on November 5, 2015 two years after breaking out of a long consolidation between $30 and $60. Following a retracement to the $87.41 February 8th low, the stock has trended higher again. Point and figure charts show a $122 to 132 balance area, so testing the top side.  (Chart courtesy of StockCharts.com)

expeC

Summary

Expedia’s revenue generation comes mostly from U.S. travel, so the dollar testing the long-term uptrend would seem somewhat worrisome. Airbnb fears appear to have been overblown but Google is already making an impact. Stock buybacks picked up after the lull in 2015. Insider selling abated the past three months. Historically, the company has shown an ability to act ahead of turning points. Expedia has beaten and missed earnings estimates by an average of 12c the last four quarters.  Estimize consensus for an Adjusted EPS of $0.11 on revenue of $2.158 bln compares to analyst consensus of $0.07 on revenue of $2.14 bln.

 

DISCLAIMER:  By using this report, you acknowledge that Selerity, Inc. is in no way liable for losses or gains arising out of commentary, analysis, and or data in this report. Your investment decisions and recommendations are made entirely at your discretion. Selerity does not own securities in companies that they write about, is not an investment adviser, and the content contained herein is not an endorsement to buy or sell any securities. No content published as part of this report constitutes a recommendation that any particular investment, security, portfolio of securities, transaction or investment strategy is suitable for any specific person.