Expedia Inc (NASDAQ:EXPE) has become an online travel vacuum, sucking up its competition while closing the gap between itself and long-time rival, Priceline Group Inc (NASDAQ:PCLN).
Just last summer, EXPE announced the acquisition of Australian booking company Wotif Group, which closed for $612 million in November 2014.
Since then, EXPE has gone on to acquire Travelocity from Sabre Corp (NASDAQ:SABR) for $280 million, with plans of adding Orbitz Worldwide, Inc. (NYSE:OWW) to its growing portfolio of leading travel brands such as Hotels.com, Hotwire and CheapTickets.com.
Expedia stock rallied hard following a fourth-quarter profit miss on Feb. 5, and now is trading near all-time highs.
And good news for new money: EXPE still has plenty of momentum left.
Expansion, Spending Will Drive EXPE Higher
Expedia encouraged investors with news that it was moving to acquire OWW. Chief Financial Officer Mark Okerstrom expects the buyout to “achieve $75 million in synergies from the deal, and Expedia Inc. would generate an additional 75 cents per share in earnings in 2015, depending on when the deal closes,” according to Skift.
The recent slew of acquisitions are a bold move in addressing rivals like Priceline, which owns the Kayak and Booking.com brands, and Google Inc (NASDAQ:GOOGL), which is becoming more aggressive in the space.
Expedia has proven it can make the most of its acquisitions. For instance, 2013 acquisition Trivago — the metasearch travel engine focused on the hotel industry — provided 68% year-over-year standalone revenue growth in fiscal 2014.
A few other positive points:
- EXPE kept shareholders in mind during 2014, spending $537 million on share repurchases — that’s 7 million shares of common stock vs. a current float of about 98 million shares. Moreover, Expedia also pays a very modest dividend of 18 cents quarterly — at 0.76%, you’re not buying EXPE stock for yield, but it’s another sign that Expedia is focused on returning cash to shareholders.
- It appears that the efforts EXPE has put into advertising across a wide range of platforms is paying off, with revenue having swelled 21% for full-year 2014. And as Travelocity and Trivago continued to grow, Q4 room growth spiked 28% year-over-year.
- Once again, EXPE witnessed an influx in free cash flow during 2014 that generated an additional $584 million. Like others in its industry, Expedia isn’t shelling out a ton of money in capital expenditure, which allows EXPE to spend more freely in other areas of business such as the acquisition of new companies.
Bottom Line
Investors have renewed faith in EXPE, and thanks to its efforts, Expedia stock should continue to reach new heights in 2015.
As of this writing, Anna Rider did not hold a position in any of the aforementioned securities.
