Will TripAdvisor (TRIP) Q1 Earnings Fall Short of Estimates? - Analyst Blog
TripAdvisor Inc. TRIP is slated to report first-quarter 2015 results on May 6. In the last reported quarter, TripAdvisor recorded a negative surprise of 10.00%. Let’s see how things are shaping up for this announcement.
Factors to Consider
TripAdvisor delivered mixed fourth-quarter results, with the top line surpassing the Zacks Consensus Estimate but the bottom line missing the same. However, earnings increased year over year.
Reported revenues of $288.0 million in the fourth quarter were down 18% sequentially but up 35.2% from the year-ago period. The year-over-year growth was driven by strength in both the click-based and display-based advertising businesses. Operating expenses also increased however, more than offsetting the revenue growth.
But the company’s strong fundamentals, various growth initiatives including Instant Booking, strong focus on developing its mobile products, expansion into international restaurant reservation and improvement in user growth and engagement, especially on mobile devices, are expected to positively impact results in the to-be-reported quarter.
The acquisition of Portuguese booking website — BestTables — will complement TripAdvisor’s existing restaurant offering by providing information about hotel bookings, and reviews and opinions about restaurants. It will further expand TripAdvisor’s presence in Europe as well as its overall market share. This will improve efficiency, thereby expanding the company’s user base, improving traffic, hotel shoppers and profits.
We believe the company’s aggressive merger and acquisition strategy and solid execution will aid growth.
Earnings Whispers?
Our proven model does not conclusively show that TripAdvisor will beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Negative Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, currently stands at -8.33%. This is because the Most Accurate estimate of 44 cents is lower than the Zacks Consensus Estimate of 48 cents.
Zacks Rank #3 (Hold): TripAdvisor’s Zacks Rank #3 when combined with a negative ESP makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Other Stocks to Consider
Here are some other companies, which you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:
iGATE Corporation IGTE with Earnings ESP of +2.38% and a Zacks Rank #3
Cogent Communications Holdings, Inc. CCOI with Earnings ESP of +33.33% and a Zacks Rank #3
Hortonworks, Inc. HDP with Earnings ESP of +1.18% and a Zacks Rank #3
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