For Immediate Release
Chicago, IL – November 1, 2010 – Zacks.com Analyst Blog features: Expedia Inc. (EXPE), Procter & Gamble Co. (PG), Priceline.com (PCLN), Orbitz Worldwide (OWW) and Google Inc (GOOG).
Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: http://at.zacks.com/?id=5513
Here are highlights from Friday's Analyst Blog:
Expedia Gathers Momentum
Expedia Inc. 's (EXPE) second quarter earnings beat the Zacks Consensus by 38 cents or 69.1%, on revenue that beat by 5.1%. As a result, Expedia shares were up 3.29% in after-market trading yesterday.
Revenue
Revenue for the quarter was $987.9 million, up 18.5% sequentially and 15.9% year over year. Expedia's results are indicative of secular growth trends in online travel spending, as borne out by all product lines in the last quarter. Currency had a 3 percentage point impact on sequential comparisons.
Revenue by Segment
Leisure customers remained the largest revenue contributors, generating nearly 83% of revenue. Corporate customers (Egencia) were under 4%, while TripAdvisor brought in the remaining 13%. The three categories grew 20.5%, 11.2% and -2.8%, respectively from the June quarter of 2010. They were up 12.2%, 43.3% and 29.6%, respectively from the year-ago quarter.
While sttrength in the leisure category was expected, given online trends, growth at Egencia comes as a welcome change. The corporate segment has been sluggish in the recent past, given the recession in the U.S. However, Expedia stated that both large companies and small and medium-sized ones had started to increase their traval expenditure. In the last quarter, Expedia added some big names, such as Procter & Gamble Co. (PG) and NASDAQ. With a stronger outlook for both leisure and corporate travel, advertisers are also coming, which helped revenue in the last quarter. TripAdvisor, in particular, did exceptionally well, recording third-party revenue growth of 59%. This business is growing at a $500 million annual runrate, with the international portion posting triple-digit year-over-year growth in each of the last 4 quarters.
Revenue by Channel
Around 68% of total revenue was generated through the merchant business (direct sales), another 20% came through the agency model (where Expedia operates as an agent of the supplier) and roughly 12% came from Advertising and Media. The three channels witnessed 23.4%, 10.1% and 8.3% sequential growth, respectively in the last quarter. Growth rates from the year-ago quarter were 13.4%, 12.0% and 41.0%, respectively.
Revenue by Product Line
Hotel and Air, the two main product lines grew 14% each from the year-ago quarter. The increase in Hotel revenue came from a 13.8% increase in room nights, helped by a 4% increase in the average daily rate (ADR). This was the biggest ADR increase since December 2008. The flattish revenue per night was encouraging, given the large number of hptel additions in the recent past. The increase in ticket revenue was attributable to a 10% increase in ticket volumes and 4% increase in the revenue per ticket. Airfares were up 9.0%, indicative of stronger demand.
Revenue by Geography
Around 60% of Expedia's quarterly revenue was generated from the domestic market, with the remaining 40% coming from international sources. The domestic market grew 10.7% sequentially and 13.0% from a year ago. The international market was much stronger, growing 32.2% sequentially and 20.2% from last year.
Bookings and Revenue Margin
Gross bookings were $6.9 billion in the last quarter, up 3.1% sequentially and up 16.5% year over year. The percentage of bookings converted to revenue (revenue margin) was 15.0%, an increase of 192 bps sequentially and a decline of 5 bps from the year-ago quarter. The international revenue margin was better than the domestic. All segments (except Egencia) and channels contributed to the sequential increase. All segments and channels had weaker revenue margins than in the year-ago quarter.
Margins
The pro forma gross margin for the quarter was 80.8%, up 98 bps sequentially and 64 bps year over year. Credit card processing costs, customer services and telesales expenses continued to increase, as the number of transactions increased from 16.9 million in the June quarter to 18.1 million in September. However, volume increases offset the impact in the last quarter and Expedia currently expects the trend to continue.
The operating expenses of $512.9 million were up 10.7% sequentially. However, the operating margin was 28.8% increased 462 bps sequentially, while declining just 6 bps from September last year. All expenses declined as a percentage of sales from the previous quarter. Sales and marketing expenses were up significantly from a year ago. Operating Income before Amortization (OIBA) increased from $256.4 million in September 2009 to $293.7 million in the last quarter.
Net Income
On a pro forma basis, Expedia generated a net income of $267.5 million, or a 27.1% net income margin compared to a $120.9 million, or 14.5% in the previous quarter and $135.1 million or 15.8% net income margin in the same quarter last year. The fully diluted pro forma earnings per share (EPS) were 93 cents compared to 42 cents in the June 2010 quarter and 46 cents in the prior-year quarter.
Our pro forma estimate excludes intangibles amortization charges on a tax-adjusted basis, but includes deferred stock compensation. Our pro forma calculations may differ from management's presentation due to the inclusion/exclusion of some items that were not considered by management.
Including the special items, the GAAP net income was $257.9 million (90 cents a share) compared to $114.3 million (40 cents a share) in the previous quarter and $117.0 million (40 cents a share) in the year-ago quarter.
Balance Sheet
Cash and short term investments totaled $1.55 billion at quarter-end, up $427.2 million during the quarter. However, Expedia raised debt during the quarter, which resulted in a net debt position of $90.4 million.
Including long term liabilities, the debt to total capital ratio was 42.2%, still at very manageable levels. Days sales outstanding (DSOs) went down from 43 to around 38 days.
The company generated $4.4 million of cash from operations and spent $40.2 million on capex, $19.7 million on dividends and $195.9 million on share repurchases.
Our Take
Expedia reported a solid third quarter and we believe there are secular growth divers in the company's business. Aside from growth prospects in the domestic market, Expedia has tremendous growth opportunities internationally, particularly in the Asia/Pacific market, where online penetration is still low. Of course, the company will continue to face challenges from players like Priceline.com (PCLN), Orbitz Worldwide (OWW) and Travelocity in all its endeavors. There are just a couple of factors that are holding back shares right now. The first is Google Inc's (GOOG) venture into the travel market, which is likely to increase costs for Expedia. The other is the incidence of occupancy taxes, which remains a hotly debated and contested issue today.
We have a short term Hold rating on Expedia shares, which translates to a Zacks #3 Rank.
Want more from Zacks Equity Research? Subscribe to the free Profit from the Pros newsletter: http://at.zacks.com/?id=5515.
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today: http://at.zacks.com/?id=5517.
About Zacks
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=5518.
Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.
Follow us on Twitter: http://twitter.com/zacksresearch
Join us on Facebook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts.
Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.
Contact:
Mark Vickery
Web Content Editor
312-265-9380
Visit: www.zacks.com
EXPEDIA INC (EXPE): Free Stock Analysis Report
GOOGLE INC-CL A (GOOG): Free Stock Analysis Report
ORBITZ WORLDWID (OWW): Free Stock Analysis Report
PRICELINE.COM (PCLN): Free Stock Analysis Report
PROCTER & GAMBL (PG): Free Stock Analysis Report
Zacks Investment Research
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Comments
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
