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Why Is TripAdvisor (TRIP) Down 11.9% Since Last Earnings Report?

Zacks Equity Research

It has been about a month since the last earnings report for TripAdvisor (TRIP). Shares have lost about 11.9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is TripAdvisor due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

TripAdvisor Misses Q2 Earnings & Revenue Estimates

TripAdvisor Inc. reported adjusted second-quarter 2019 earnings of 45 cents per share, missing the Zacks Consensus Estimate of 52cents. However, the reported earnings increased 9.8% from the year-ago quarter.

Revenues in the second quarter were $422 million, missing the Zacks Consensus Estimate of$447 million. Moreover, the top line was down 3% year over year.

Notably, the stock has lost 21.3% compared with theindustry’s decline of 17% over the past year.

Revenue Segments

Starting first quarter 2019, TripAdvisor revised its reporting structure into three segments: Hotels, Media & Platform, Experiences & Dining, and Other.

Revenues of $254 million (accounting for 60% of total revenues) from the Hotels, Media & Platform segment were down 7%from the year-ago quarter.

Revenues of $125 million from the Experiences & Dining segment, which accounted for 30% of total revenues, grew 28% year over year. The company will likely continue to invest in supply and marketing to accelerate E&D products, and drive attractive returns in the long run.

The Other segment contributed the remaining 10%. This segment includes revenues from rentals, SmarterTravel, Flights/Cruise and TripAdvisor China. Revenues from this segment were $43 million, down 32% from the year-ago quarter.

Operating Results

TripAdvisor’s adjusted operating expenses of $299 million were down 9.7% from $331 million a year ago. Per the press release, operating margin of 15.6% was up 430 basis points from the year ago-quarter.

On a GAAP basis, the company’s net income was $34 million or 24cents per share versus $32 million or 23 cents in the prior-year quarter.

Balance Sheet & Cash Flow

TripAdvisor exited the quarter with cash, cash equivalents and short-term investments of roughly $966 million, up from $811 million recorded in the first quarter. Accounts receivables were $270 million, up from $236 million in the first quarter.

Cash flow from operations was $181millionversus $182 million in the first quarter. Capex was $21 million, up from $17 million in the first quarter.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -6.9% due to these changes.

VGM Scores

At this time, TripAdvisor has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, TripAdvisor has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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