Sabre Corporation SABR recently acquired leading airline retailing software provider — Radixx — for approximately $110 million.
The acquisition is expected to help Sabre add retailing, distribution and fulfilment capabilities to cater to the fast-growing market of low-cost carriers (LCCs).
Reportedly, Radixx has a presence in the LCC space, which has grown two times faster than full-service carriers over the past five years. Per T2RL data, nearly 30% of annual global passengers are from LCCs. Moreover, Radixx boasts products like a strong LCC passenger service system and Internet booking engine.
Notably, the acquisition is expected to garner revenues of approximately $20 million in 2019. However, the deal is expected to slightly weigh on Sabre's adjusted earnings per share in 2020 due to higher investments in the LCC space.
Radixx will operate as Sabre’s Airline Solutions business’ standalone subsidiary, thereby enhancing it.
Airlines Solutions: A Major Growth Driver
Sabre has witnessed consistent revenue growth since its initial public offering in 2014. Robust growth in the company’s Airline Solutions business aided top-line growth.
Sabre Corporation Revenue (TTM)
Sabre Corporation revenue-ttm | Sabre Corporation Quote
Notably, Sabre is a certified NDC level 3 aggregator, validated by International Air Transport Association, making it the third global distribution system after Travelport and Amedeus to receive this certification.
The company also started its Beyond NDC partner program in association with travel and airline industry leaders.
In the last reported quarter its Airline Solutions revenues grew 3.4% year over year.
Deals to Boost Airlines Solutions
Sabre seems to be focused on acquisitions to boost its Airline solutions segment, which is expected to be roughly flat year over year for full-year 2019.
The news of its acquisition of Radixx comes at a turbulent time. In August this year, the company was sued by the U.S. Department of Justice, seeking to block the company's $360 million acquisition of Farelogix, an airline technology vendor.
A lawsuit was filed, stating that Sabre’s acquisition of Farelogix will help it to eliminate a strong contender that introduced new technology to the airlines industry.
With the Radixx buyout, Sabre has strengthened this business segment by expanding its presence to an actively growing segment of the airlines industry. Moreover, if Sabre wins the Farelogix case, the deal will boost its Airlines Solutions business further.
Zacks Rank & Stocks to Consider
Sabre currently carries a Zacks Rank of #4 (Sell).
A few top-ranked stocks in the broader technology sector are Alteryx, Inc. AYX, Benefitfocus, Inc. BNFT and Five9, Inc. FIVN, each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for Alteryx, Benefitfocus and Five9 is 17.62%, 20% and 10%, respectively.
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