Ctrip Rose over 7% on Better-than-Expected Q4 EPS and Revenue

Fourth-quarter performance

Ctrip.com International (CTRP) stock soared over 7% during after-hours trading yesterday after the online travel agency reported better-than-expected results for the fourth quarter of 2018. The company’s impressive revenue outlook for the forthcoming quarter also boosted investors’ confidence in the stock.

Ctrip Rose over 7% on Better-than-Expected Q4 EPS and Revenue

The China-based travel services provider reported non-GAAP earnings per ADS of 0.90 Chinese yuan (or $0.13) compared to Wall Street analysts’ projected loss of 0.22 Chinese yuan. However, on a YoY basis, earnings plunged over 42% from 1.56 Chinese yuan (or $0.24) reported in the fourth quarter of 2017. The drastic YoY decline in bottom-line results was mainly due to heightened costs and operating expenses, which more than offset the benefit of increased revenues and lower taxes.

Fourth-quarter net revenues increased 22% YoY to 7.6 billion Chinese yuan ($1.1 billion) and came in ahead of the Wall Street estimates of 7.2 billion Chinese yuan. Growing revenues from packaged tours, accommodation reservations, transportation ticketing, and corporate travel aided the top line.

Segment-wise, accommodation reservation revenues increased 22% YoY to 2.7 billion Chinese yuan ($386 million), primarily driven by higher volumes. Revenues from transportation ticketing grew 17% YoY to 3.4 billion Chinese yuan ($496 million) due to higher volumes. Packaged-tour sales rose 31% YoY to 721 million Chinese yuan ($105 million) mainly driven by robust volume growth in organized and self-guided tours. Revenues from the corporate travel segment grew 35% to 279 million Chinese yuan ($41 million), mainly driven by expansion in travel product coverage.

The company’s non-GAAP income from operations plunged 62.9% YoY to 261 million Chinese yuan ($37 million), while the operating margin contracted 800 basis points to 3% mainly due to heightened operating expenses. Ctrip stated that increased investment in product development and sales and marketing initiatives led to a massive rise in operating expenses.

Optimistic outlook

Management believes that the company’s revenue growth momentum will continue in 2019. During the earnings release, the travel agency’s executive chair James Liang said, “Based on the strong foundation we have laid over the past few years, we expect our market share to increase at an even faster pace going forward as we continue to leverage operational improvements.”

The company anticipates first-quarter net revenues to increase in the range of 18%–23%, which translates to 7.9 billion–8.3 billion Chinese yuan. Management’s first-quarter revenue expectations are higher than Wall Street analysts’ estimate of 7.9 billion Chinese yuan.

Most of Ctrip’s peers (IYW) have reported robust bottom-line results for the fourth quarter. Non-GAAP EPS for TripAdvisor (TRIP), Expedia Group (EXPE), and Booking Holdings (BKNG) grew 350%, 48%, and 33%, respectively, in the fourth quarter.