Why Is Expedia (EXPE) Up 16.5% Since Last Earnings Report?
It has been about a month since the last earnings report for Expedia (EXPE). Shares have added about 16.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Expedia due for a pullback? 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 drivers.
Expedia Reports Loss in Q4
Expedia Group reported fourth-quarter 2020 adjusted loss of $2.64 per share, wider than the Zacks Consensus Estimate of a loss of $1.93. Further, the bottom line is wider than the prior quarter’s loss of 22 cents per share. Notably, the company reported earnings of $1.24 per share in the year-ago quarter.
Revenues of $920 million missed the Zacks Consensus Estimate of $1.1 billion. Further, the top line declined 38.8% sequentially and 67% year over year.
Disruptions caused by the ongoing pandemic remained a major woe. Increasing number of COVID-19 cases worldwide resulting in the shutdown of several travel markets hurt the performance of the company in the fourth quarter.
Expedia’s gross bookings were $7.6 billion, which fell 12.3% from the previous quarter and67% year over year. Further, the figure missed the Zacks Consensus Estimate of $7.7 billion.
Headwinds in the global travel industry due to the coronavirus outbreak are major concerns for the company in the days ahead.
Nevertheless, optimism regarding the widespread availability of coronavirus vaccines remains a tailwind.
Further, the improving performance of Vrbo remains a positive. The growing momentum of Vrbo in room nights stayed is likely to contributed well in the near term. Additionally, proper execution of the company’s cost-saving strategies remained a tailwind.
Revenues by Segment
Retail: The company generated $720 million in revenues (76.3% of total revenues) from the segment, which declined 64% year over year.
B2B: The segment yielded revenues of $186 million (20.2% of total revenues), which fell 71% from the year-ago quarter.
trivago: Revenues from the segment totaled $38 million (4.1% of revenues), down 78% year over year.
Revenues by Business Model
The Merchant model generated revenues of $521 million (56.6% of revenues), down 67% year over year. Merchant gross bookings were $4.2 billion, down 63% from the prior-year quarter.
The Agency division generated revenues of $271 million (29.5% of revenues), slumping 67% from the prior-year quarter. Agency gross bookings were $3.4 billion, down 72% year over year.
Advertising & Media and other generated $128 million of revenues (13.9% of the top line), decreasing 62% from the year-ago quarter. This can primarily be attributed to sluggishness in Expedia Group Media Solutions and trivago.
Revenues by Geography
Expedia generated $698 million revenues (75.9% of total revenues) from domestic regions, down 56% from the prior-year quarter.
Further, revenues generated from international regions totalled $222 million (24.1% of revenues), down 81% on a year-over-year basis.
Revenues by Product Line
Lodging revenues, which accounted for 86% of total revenues, declined 58% from the prior-year quarter. Although the company witnessed a 6% rise in revenues per room night, stayed room nights declined 61%.
Air revenues accounted for 4% of revenues. The metric was down 80% year over year. Notably, air tickets soldand revenue per ticket plunged 69% and 35% year over year, respectively.
Operating Details
Adjusted EBITDA was ($160) million in the reported quarter compared with $478 million in the year-ago quarter.
Further, adjusted selling and marketing expenses were $500 million, down 60.2% year over year. Additionally, adjusted general and administrative expenses were $105 million, down 42.3% year over year. Adjusted technology and content expenses were $207 million, down 31.7% from the year-ago quarter.
The company reported fourth-quarter operating loss of $463 million against the operating income of $160 million in the year-ago quarter.
Balance Sheet & Cash Flow
As of Dec 31, 2020, cash and cash equivalents were $3.4 billion, down from $4.3 billion as of Sep 30, 2020. Short-term investments totaled $24 million, up from $23 million in the previous quarter.
Additionally, long-term debt was $8.2 billion at the end of the fourth quarter compared with $8.1 billion at the end of the third quarter.
Further, Expedia utilized $385 million of cash in operations in the reported quarter compared to $819 million of cash used in operations in the last quarter. Moreover, free cash flow was ($513) million in the fourth 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 -38.22% due to these changes.
VGM Scores
Currently, Expedia has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. 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, Expedia has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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