Expedia (EXPE) stock shot higher on Friday after impressive Q2 earnings confirmed once again that the industry can do no wrong. As if the online travel industry needed any more good news.
EXPE stock roared higher on the beat, shooting up as much as 10% and reaching all-time highs. The stock was already walloping the market this year, with gains of 26% through Thursday — more than triple the 8% return of the Nasdaq.
Friday’s surge now puts Expedia up 38% for the year-to-date. But even after the strong quarter, EXPE stock still looks like a deal. Here are some of the highlights from its most recent quarter and what investors can expect going forward.
Great Results & a Consolidating Industry
Expedia earnings came in at an adjusted 89 cents per share versus the year-ago $1.03, beating analyst estimates by 4 cents in the process. Revenue also topped expectations, growing 11% to come in at $1.66 billion, above the $1.65 billion consensus forecast.
EXPE earnings fell on a year-over-year basis, but only because of extreme negative pressure from its stake in the Chinese online travel company eLong (LONG). Without the drag of eLong, Expedia’s earnings per share would have risen 4%; with it, they fell 13%.
Thankfully, owners of EXPE stock don’t have to worry about eLong any longer. That’s because in May, the company agreed to sell its 62% stake in the lame duck to another Chinese travel-booking website Ctrip.com (CTRP) for $671 million. It was the latest in a series of savvy deals Expedia has made recently in the rapidly-consolidating online travel industry.
In writing about the LONG sale earlier this year, I detailed the recent M&A history of Expedia:
“Expedia has been wheeling and dealing in 2015: In late January, EXPE acquired the online travel and booking site Travelocity from Sabre Corp. (SABR) for $280 million in cash. Not three weeks later, EXPE turned around and dropped $1.6 billion in cash for Orbitz Worldwide, Inc. (OWW), consolidating the online travel space even further.”
Investors can now see clearly that this is the right strategy: Acquire growing brands like Travelocity and Orbitz while getting rid of the losers like eLong.
Expedia’s second-quarter results were driven by room night growth, which actually accelerated from the year-ago quarter, growing at a 35% clip. A year ago, room night growth came in at just 25%. EXPE added 27,000 properties to its portfolio, which now sits at nearly 260,000 properties worldwide.
Oh, and the EXPE board of directors also approved a 33% hike in its dividend, which now sits at 24 cents per quarter, an annual yield of about 0.8%. Nothing to write home about, but a great sign about the company’s confidence in its cash flow.
There’s a lot to like about EXPE stock going forward, not least of which is brilliant media mogul Barry Diller, the Chairman of the Board. He’s also the brains behind IAC/Interactive Corp (IACI), which spun off Expedia in 2005. Under his guidance, IACI has grown and spun off Expedia, Lendingtree (TREE), Live Nation (LYV) and HSN (HSN), and it plans to spin off its online dating division, Match Group, later this year.
Even after Expedia’s jump today, I’m a firm believer that EXPE stock will continue to outperform the market going forward.
As of this writing, John Divine did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @divinebizkid or email him at firstname.lastname@example.org.
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