Morgan Stanley On Why Expedia's Results Were 'Better Than Feared'

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Expedia Inc EXPE reported better-than-expected results for 1Q16, with strong room night growth. Morgan Stanley’s Brian Nowak maintained an Equal-weight rating for the company, with price target of $115. The analyst noted that although the company had a good start to the year, 1Q results were only a little better than feared.

Room Nights Drove Results

Expedia’s revenue beat expectations by 1 percent, backed by faster-than-expected domestic and international room night growth. Both Expedia.com and Hotels.com saw healthy growth in room nights across all regions. Overall, growth in global room nights came in at 37 percent y/y, ahead of Morgan Stanley’s 31 percent estimate.

The company was able to beat total EBITDA expectations with higher-than-anticipated top-line and better EBITDA contributions from Orbitz and HomeAway. “In all, the 1Q revenue and EBITDA beat flowed down to the bottom line as non-GAAP EPS of $0.09 was 17 cents above us and 14 cents above the Street,” analyst Brian Nowak wrote.

Seasonally Weaker 2Q

Despite having generated higher-than-expected EBITDA in 1Q, Expedia reiterated its full-year adj. EBITDA growth guidance of 35-45 percent. “The company noted this was because of a few factors in 1Q that shifted ~$20mn of EBITDA to 1Q from 2Q, in particular: 1) the Easter holiday fell in 1Q this year vs. 2Q last year and 2) EXPE opportunistically shifted some marketing dollars planned for 2Q into 1Q,” Nowak mentioned.

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Posted In: Analyst ColorReiterationAnalyst RatingsBrian NowakMorgan Stanley
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