Orbitz Worldwide: Its Symbol Says A Lot...OWW

Price:$3.30;Forward P/E:9;Earnings growth:116%;Projected Sales Growth:6%;Market Cap:$345 million

Why It's Featured: Global travel improving; earnings beat estimates last 4 quarters.
Danger Zones: European disorder; slowdown in travel.

Orbitz Worldwide, Inc. (OWW-NYSE) operates as an online travel company worldwide.  It enables leisure and business travelers to search for and book a range of travel products and services.  The company offers various products and services comprising air travel, hotels, vacation packages, car rentals, cruises, travel insurance, as well as destination services, such as ground transportation, event tickets, and tours.

Brands includes Orbitz, CheapTickets, The Away Network, and Orbitz for Business in the United States; ebookers in Europe; and HotelClub and RatesToGo internationally.

Orbitz Worldwide, Inc. also licenses its technology and business services to third parties, such as airlines and hotel partners and provides them various private label solutions, including building and hosting custom Websites and supplying content feeds to partners' Websites.  The company was founded in 2000 and is headquartered in Chicago, Illinois. Orbitz Worldwide, Inc. is a subsidiary of Travelport Limited.

Any investor who owned Orbitz from 2007 when it went public until early 2009 knows why the symbol OWW was chosen.  It was nothing but pain.  The stock price went from $15 to $1.10 before finally rebounding.  It healed fast and shot to $$8.10 by late 2009 only to get trashed again by late last year to $1.60.  Now it's moving higher.  Can it keep going?

As always, earnings will provide the fuel.  While the company lost 6 cents a share in 2009, it earned 12 cents in 2010, and 12 cents again last year.  This year, 9 analysts have a consensus of 26 cents a share, the highest level since going public.  For 2013, they expect 38 cents (with a range of 26 cents to 57 cents).  Strangely enough, second quarter results (ends in June) should be 5 cents compared to 8 cents last year, then should bump to 15 cents vs 11 cents in the third period.

First quarter came in solid with revenues up close to 3% thanks to hotels and vacation packages.  Still, it lost 6 cents in the period which was still better than predictions of a loss of 8 cents.  A trend is starting to show in hotel reservations that suggests global travel is improving.  Analysts think it will continue.  In the last 4 quarters, the company beat analysts' estimates by 700%, 83.3%, 100% and 25% respectively. 

Part of the company's growth comes from private label distribution channels.  A good example is the recent contract signed with American Express which will launch by the end of this year.  Look for more of these private label deals.  Management stated it expects this source of revenues to be significant for future growth.

Investors are beginning to believe again.  The stock is up 53.1% in the last 52 weeks.  If management continues to beat estimates, reaching its old high of $15 in 2007 could happen, but only after consistent growth and not in a couple of months.

- Essential Numbers:
- Price to sales: .46
- Price to book: 2.35
- Operating margin: 7.35%
- Profit margin: -4.26%
- Return on equity: -19.97%
- Return on assets: 2.81%
- Revenues (last 12 months): $771.67 million
- Total cash: $187.66 million
- Total cash per share: $1.80
- Total debt: $440.48 million
- Total debt to equity: 291%
- Current ratio: .54
- Book value per share: $1.46
- Beta: 1.78
- Total shares outstanding: 104.1million
- Float: 22.85 million
- Held by insiders: 1.58%
- Held by institutions: 90.8%

Here's an interesting stat: Affiliates of the Blackstone Group, one of the largest asset managers in the world and known for its intelligence, own 52.9% of the stock.  How long they've held it and how long they will hold it is unknown, but it's something that suggests some smart people like the company.

Old investors suffered through a lot with OWW.  New investors may be able to miss all the pain.  But keep an eye on unrest in Europe over  Eurozone cohesion.  It may cause some tourists to stay home.  Or they could go other places that require a plane ticket.  OWW doesn't care where they go, as long as they go.

- Company Website: www.orbitz.com

- Ted Allrich
May 24, 2012