Expedia to Soar to New Highs?
Expedia Inc (EXPE) reports its FQ2 ’15 results after the closing bell this afternoon. Currently, the Estimize community are predicting an EPS figure of $0.87 compared to Wall Street which predict $0.85. Estimize are also predicting higher revenues of $1.676B relative to Wall Street’s $1.661B consensus.
Expedia has been a solid investment year-to-date (YTD) returning a capital gain of 25.20% compared to the NASDAQ which has appreciated 7.91%. Expedia has also been able to outperform some of its key competitors (YTD) including The Priceline Group (PCLN) and TripAdvisor (TRIP) who have returned 6.89% and -2.75% respectively.
Expedia delivers to its customers a customized travel experience through allowing users to combine flights, accommodation, experiences etc. into the one booking. Expedia can also be used to book each component separately. Expedia’s success can be attributed to the company’s solid brand name and diverse portfolio of brands offering travel solutions across the globe. Expedia’s portfolio consists of some household names including hotels.com, trivago.com and wotif.com.
The stronger US Dollar is also expected to positively contribute to Expedia’s revenues and earnings this earnings. With the majority of Expedia’s earnings denominated in USD, Expedia’s revenues should not be materially affected by the surge in the US currency. Further, with a continuation in the strengthening in the US economy, a strong US Dollar is expected to further increase the demand for international travel outbound from the United States.
Despite all optimism currently connected with the online travel industry and particularly Expedia, there are some risks heading into Expedia’s result. As demonstrated by TripAdvisor’s quarterly results which were announced earlier this week. TripAdvisor delivered a weak EPS number missing both Wall Street and Estimize predictions. The below par EPS number resulted in the stock plunging circa 9% in after-hours trading. One of the causes for the lower than expected bottom-line figure was higher marketing costs and advertising expenses. Investors holding Expedia stock into the close tonight will be hoping that Expedia have not experienced similar headwinds to TripAdvisor over the previous quarter.
Finally, investors will want more guidance from management with respect to the attempted acquisition of Orbitz (OWW). UBS recently placed a SELL rating on Orbitz due to their belief that regulatory constraints may block the Expedia’s acquisition of Orbitz. Investors will be eager to hear if management have any updates on the acquisition or if their outlook as changed recently.
