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Market Analysis
Expedia (EXPE) Stumbles on Bookings Despite Earnings Beat, Drags Down Travel Stocks
Expedia Group's shares fell in extended trading despite posting a beat on adjusted EPS, as gross bookings and operating income fell short of some analyst forecasts.
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Expedia Group (NASDAQ: EXPE) reported fourth-quarter earnings after the bell on Thursday, posting results that fell short of expectations on some key metrics. The company announced quarterly gross bookings of $21.67 billion, lower than the $22 billion analysts anticipated. It also reported a 19% year-over-year decline in operating income for the quarter despite a 9% increase in booked room nights.
On the positive side, Expedia delivered adjusted earnings per share of $1.72, slightly higher than estimates of $1.69. Revenue matched expectations at $2.89 billion, while adjusted EBITDA of $532 million surpassed the forecast of $526.8 million.
The company also announced the appointment of Ariane Gorin as new CEO, succeeding Peter Kern who will take on the role of Vice Chair of the board. Expedia Group Chairman Barry Diller praised Gorin as a “superb executive” and the board’s preferred internal candidate.
Expedia Stock Drops, Travel Peers Follow Suit
Expedia’s stock fell in after-hours trading following the mixed earnings report. Investor reaction was initially negative, with shares declining over 4% from the closing price.
The downward movement extended to Expedia’s travel industry peers in pre-market trading the next morning. Booking Holdings (NASDAQ: BKNG) dropped 4.33% while Airbnb (NASDAQ: ABNB) declined 3.24%, indicating a potential broader impact on the sector from Expedia’s results.
Expedia’s Challenges Ahead
While Expedia topped earnings expectations, the weak guidance on gross bookings points to some near-term headwinds. Coupled with the decline in Q4 operating income, it suggests that cost pressures may be catching up with the recovery in travel demand.
Appointing a new CEO could bring strategy changes moving forward as Expedia looks to boost bookings relative to peers. Ariane Gorin will need to balance driving growth in room nights while maintaining profitability in order for shares to regain positive momentum.
With Booking and Airbnb stock following Expedia down in pre-market trading, the Q4 earnings miss also creates some broader uncertainty around the strength of the travel recovery. Investors may take a “wait and see” approach regarding the sector pending evidence of an inflection in bookings growth.
Disclaimer: The author does not hold or have a position in any securities discussed in the article.
Tim Fries
Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate on the investment team at RW Baird's US Private Equity division, and is also the co-founder of Protective Technologies Capital, an investment firm specializing in sensing, protection and control solutions.
