North America

Earnings Preview: Expedia Q4 2016 (EXPE)

By: Craig Bowles

Overview

Expedia, Inc. (EXPE) is slated to report 4Q 2016 earnings after the bell on Thursday, February 9th. 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 two global online travel agents, Expedia’s earnings could influence the direction of index futures and other broad market gauges.

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Outliers & Strategy

Key measures:

  • Adjusted Earnings Per Share (EPS): The current Street estimate is $1.38 (range of $1.08 to $1.79. (Source: Yahoo! Finance) Consensus was $1.39 three months ago.
  • Revenues: Analysts expect an increase of 22.0% y/y to $2.07 bln (range $1.99 bln to $2.17 bln).
  • Expedia shares trade at a Price/Book of 4.7 versus the 5-year average of 4.5; Price/Sales 2.2 vs 5-year average of 2.1; and Price/Cash Flow of 13.2 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 22 (17 last qtr) Buy, 5 Hold, and 1 Sell ratings. (source: MarketBeat.com)
  • Insiders sold 23,619,343 shares over the last three months and sold 23,908,442 shares in the past year. (source: NASDAQ.com)  Buybacks had been running at $500 mln per year before 2015’s $61 mln. Last 12 mths picked back up to 379 mln. Buybacks pulled back was in 2007 in the face of economic worries.
  • Expedia and Priceline (PCLN) are the top two global online travel agents with similar gross-hotel bookings (US$30bn). 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 7.96%. Options are pricing in an implied move of 6.45% off earnings.

Recent News

  • 02/01: At least 1,000 travelers who booked using Expedia were impacted by the travel ban, according to a post on Barron’s.com.
  • 01/14: Credit Suisse initiated coverage of Expedia with an Outperform rating citing a refocusing on driving higher rates following a year of digesting acquisitions. A near-term buying opportunity could come from weaker than expected 2017 Ebitda growth guidance in January due to cloud and HomeAway investments, according to a post on Barron’s.com.
  • 01/09: Barron’s thinks Expedia’s stock could rise 25% in 2017 citing a shift to booking rooms on smartphones and a rise in cash flow, according to a post on Barron’s.com.
  • 12/09: CLSA suggests that Expedia’s recent purchase of vacation-rental company HomeAway has given it access to the same growing market as Airbnb and should result in “significant upside potential” for its stock, according to a post on Barron’s.com.
  • 10/28: Expedia is remaking its business through acquisitions. The latest numbers suggest the plan is on track as HomeAway’s revenue jumped 61% last quarter, 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 $88.40 February 8th low, the stock has trended higher again. Point and figure technicians have a bearish price objective of $97 but their uptrend line is $106.  (Chart courtesy of StockCharts.com)

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Summary

Expedia’s revenue generation coming mostly from U.S. travel should be a positive given the strong dollar. Stock buybacks picked up after the lull in 2015 but the recent surge of insider selling makes you wonder if the buybacks will wane in 2017. 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 $1.38 on revenue of $2.074 bln compares to analyst consensus of $1.38 on revenue of $2.07 bln.

 

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