Expedia Inc EXPE reported mixed results for Q2. UBS’s Eric J. Sheridan maintained a Buy rating on the company, while reducing the price target from $145 to $142. He commented on the positives and negatives Expedia exhibited in its second quarter.
2Q Negatives
Analyst Eric Sheridan mentioned the concerns in the quarter as:
- Higher-than-anticipated deceleration in organic hotel room night growth, from 24 percent to 12 percent. The lackluster growth was partly on account of execution issues related to the Orbitz integration
- Expedia suggested that there could be only a modest recovery in hotel room night growth in 2H16, while also indicating a lower-than-expected EBITDA contribution from its organic business in the back half
- Continued y/y decline in revenue per room night
2Q Positives
Sheridan enumerated the positives in the quarter as:
- Significant Q2 EBITDA beat, on the back of margin upside in Core OTA, trivago and HomeAway
- Expedia indicated it could explore the feasibility of a trivago IPO by yearend
- The company reiterated its adj. EBITDA guidance for FY16, and gave positive commentary on HomeAway and Orbitz synergies
- Capital outlay for new headquarters could be closer to only 50 percent of the earlier estimate
- Expedia announced a dividend hike from $0.24 to $0.26
The analyst reduced the revenue, adj. EBITDA and adj. EPS estimates for Q3 from $2.56b to $2.55b, from $681mm to $645mm and from $2.67 to $2.52, respectively. The revenue, adj. EBITDA and adj. EPS estimates for FY 2016 have been lowered from $8.82b to $8.70b, from $1.62b to $1.60b and from $4.96 to $4.90, respectively.
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