Earnings beat

Expedia (EXPE) shares rose ~8% during after-hours trading on February 7 following its better-than-expected fourth-quarter results. The company provided a strong outlook for 2019. Expedia’s fourth-quarter adjusted EPS of $1.24 beat analysts’ expectation of $1.08 and rose ~48% from the fourth quarter of 2017. The strong bottom-line growth YoY (year-over-year) was mainly driven by higher revenues, efficient cost management, and the lower tax rate.

Expedia Rose ~8% after Its Q4 Earnings Beat

Expedia’s fourth-quarter revenues rose 10% YoY to $2.56 billion due to the strong performances in its Core OTA, Egencia, and HomeAway segments. The expanding lodging portfolio and an improvement in the nights stayed also added to the company’s top-line results. However, the YoY growth was partially offset by the weak performance in its Trivago (TRVG) subsidiary. Expedia’s total revenues beat analysts’ forecast of $2.54 billion.

Expedia’s total adjusted costs and expenses rose 9% YoY to $2.31 billion mainly due to higher selling and marketing expenses, an increased headcount, a rise in general and administrative expenses, and increased investment in technology. Despite the rise, as a percentage of the revenues, Expedia’s total costs and expenses fell by 90 basis points to 81.9% from 82.8% in the fourth quarter of 2017. As a result of higher revenues and efficient cost management, Expedia’s adjusted EBITDA in the fourth quarter increased 17% YoY to $471 million.

Expedia’s fourth-quarter bottom-line results also benefited from a lower effective tax rate due to the enactment of the Tax Cuts and Jobs Act in 2017. The company’s adjusted effective tax rate was 24% in the fourth quarter—compared to 31% in the fourth quarter of 2017.

Outlook

Expedia expects its growth momentum to continue in 2019. The company expects 10%–15% growth in its adjusted EBITDA this year, which in absolute terms signifies $2.17 billion–$2.27 billion (midpoint is $2.22 billion). The projection is higher than analysts’ estimate of $2.17 billion.

Analysts expect strong EPS growth for most online travel agencies (IYW) in the fourth quarter. TripAdvisor’s (TRIP) fourth-quarter EPS will likely increase five-fold to $0.29 from $0.06 in the fourth quarter of 2017. Booking Holdings (BKNG) is projected to report 15.3% higher EPS and reach $19.44. However, Ctrip.com International (CTRP) is expected to report a loss of $0.22 compared to its earnings of $1.56 in the fourth quarter of 2017.

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