U.S. Markets closed

Expedia Group (EXPE) Q1 Earnings Top, Revenues Lag Estimates

Zacks Equity Research

Expedia Group, Inc. EXPE reported first-quarter 2019 adjusted loss of 27 cents per share, narrower than the Zacks Consensus Estimate of a loss of 36 cents. Further, the reported figure is also narrower than the loss of 46 cents per share in the year-ago quarter. Notably, the company reported earnings of $1.24 per share in the prior quarter.

Revenues increased 4% year over year and 1.9% on a sequential basis to $2.61 billion. Notably, the figure missed the Zacks Consensus Estimate of $2.69 billion.

The top line was driven by robust performance of Vrbo which was previously known as HomeAway, Brand Expedia and Expedia Partner Solutions. Further, improving stayed nights and strengthening lodging platform continued to contribute to the results.
Expedia recorded gross bookings of $29.41 billion in the first quarter, which came ahead of the Zacks Consensus Estimate of $29.38 billion. Moreover, the figure improved 8.1% year over year and 33.9% sequentially.

However, sluggishness in the Trivago segment and Easter shift acted as headwinds during the reported quarter.

We note that shares of Expedia plunged by 3.49% in the after-hours trading on Thursday. This can primarily be attributed to lower–than-expected revenues in the reported quarter.

Nevertheless, shares of Expedia have returned 15.2% over a year, against the industry’s rally of 12.5%.

Revenues by Segment

Core OTA segment revenues (78.1% of total revenues) increased 5.8% year over year to $2.04 billion. The segment witnessed gross bookings of $23.03 billion, reflecting year-over-year growth of 9%. Robust growth in stayed room nights and expanding international footprints of Core OTA brands drove the segment’s top line.

Egencia revenues (5.9% of revenues) increased 1.3% on year-over-year basis to $153 million. This can be attributed to strong performance in quarterly bookings which came in $2.22 billion, up 7% from the prior-year quarter.

The company’s strong supply acquisition efforts acted as a tailwind in accelerating room nights growth within this segment, which in turn drove the top line. Further, Expedia’s continued focus toward delivering enhanced product experience remained positive in attracting customers to this platform.

Vrbo (10.2% of revenues) generated $267 million in the fourth quarter, advancing 14.1% from the year-ago quarter. This segment witnessed year-over-year growth of 5% in its gross bookings, which came in at $4.16 billion. Further, Vrbo experienced growth of 8% in the stayed property nights on a year-over-year basis. Vrbo’s growing instant bookable listings remained a tailwind throughout the first quarter.

Moreover, Trivago revenues (9.1% of revenues) declined 25.7% year over year to $237 million.

Revenues by Business Model

Merchant model generated revenues of $1.39 billion (53.4% of revenues), up 4.3% year over year.

Agency division generated revenues of $686 million (26.3% of revenues), surging 4.3% from the prior-year quarter.

Advertising & Media yielded $264 million of revenues (10.1 % of revenues), declining 6.4% from the year-ago quarter. This was primarily owing to currency headwinds and weak performance by trivago.

Moreover, HomeAway (10.2% of revenues) generated $267 million in the reported quarter, climbing 14.1% from the year-ago quarter.

Revenues by Geography

Expedia generated $1.48 billion revenues (56.6% of total revenues) from domestic regions, up 9.2% from the prior-year quarter. This was primarily driven strong domestic room nights which improved 8% from the year-ago quarter. This led to acceleration in gross bookings in these regions, which surged 11% year over year.

Further, revenues generated by international regions were $1.13 billion (43.4% of revenues), down 2.1% on a year-over-year basis. Excluding the impact of trivago headwinds, revenues would have reflected growth of 2% from the year-ago quarter. Further, foreign exchange fluctuation remains a concern. Nevertheless, Expedia witnessed solid growth of 11% in room nights in international regions during the reported quarter. Further, gross bookings rose 4% from the prior-year quarter.

Revenues by Product Line

Lodging revenues (66% of total revenues) came in $1.73 billion, rising 7% from the prior-year quarter. This can be primarily attributed to year-over-year growth of 9% in stayed lodging room nights. Further, strong momentum in Expedia PartnerSolutions, Brand Expedia and Hotels.com drove lodging revenues.

Further, Expedia’s global lodging portfolio exceeded 1.1 million properties as of Mar 31, 2019.

Air revenues were $248 million (10% of revenues), up 3% year over year. This was driven by 11% increase in air tickets sold.

Expedia Group, Inc. Price, Consensus and EPS Surprise

Expedia Group, Inc. Price, Consensus and EPS Surprise | Expedia Group, Inc. Quote

Operating Details

Adjusted EBITDA improved massively by 42% year over year to $176 million. This can be attributed to rise in Egencia and Core OTA EBITDA which exhibited year-over-year growth of 9% and 6%, respectively.

Moreover, adjusted selling and marketing expenses were $1.5 billion, up 1.1% year over year.

Expedia incurred operating loss of $131 million in the reported quarter, compared with the year-ago quarter’s loss of $165 million. This came on the back of accelerated growth in cost of revenues.

Balance Sheet & Cash Flow

As of Mar 31, 2019, cash and cash equivalents were $3.71 billion, up from $2.44 billion as of Dec 31, 2018. Short-term investments totaled $466 million, increasing from $28 million in the previous quarter.

Further, Expedia generated $2.15 billion cash from operations during the reported quarter. Also, it generated free cash flow of $1.87 billion.

Additionally, the company paid quarterly dividend worth $47 million (32 cents per share) during the reported quarter.

Guidance for 2019

Expedia expects adjusted EBITDA to witness growth within the range of 10-15% in 2019.

Zacks Rank and Stocks to Consider

Currently, Expedia carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are ACI Worldwide, Inc. ACIW, Avid Technology, Inc. AVID and Agilent Technologies, Inc. A. While ACI Worldwide and Avid Technology currently sport a Zacks Rank #1 (Strong Buy), Agilent Technologies carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth for ACI Worldwide, Avid Technology and Agilent Technologies is projected at 12%, 10% and 11.75%, respectively.

Today's Best Stocks from Zacks

Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1% and +98.3%.

This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.

See their latest picks free >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Expedia Group, Inc. (EXPE) : Free Stock Analysis Report
Avid Technology, Inc. (AVID) : Free Stock Analysis Report
ACI Worldwide, Inc. (ACIW) : Free Stock Analysis Report
Agilent Technologies, Inc. (A) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research