Earnings Beat In The Cards For Expedia’s Stock?

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Expedia (NASDAQ: EXPE), a travel company providing everything from airline tickets, hotel rooms, and car rentals, to cruises, is scheduled to announce its fiscal third-quarter results on Thursday, November 3. We expect Expedia’s stock to likely trade higher due to revenues and earnings beating consensus estimates. The company is benefiting from strong travel demand that has remained resilient despite macro headwinds. The B2B segment has outperformed Expedia’s retail side in terms of growth, while also driving margins higher. We expect this momentum to continue into Q3 as well. While the company did not provide any financial guidance, management projects optimism for the rest of the year.

The company’s stock traded 47% lower this year due to anxiety over a potential recession, staffing issues with airlines, and higher interest rates. We believe that the pent-up travel demand, after almost two years of deeply depressed travel volume, should set the path for the rest of 2022 and the next year of 2023. The company shared its sales trends by month, explaining that lodging gross bookings were up 9% in April, up 9% in May, and up 5% in June. In light of these trends, Expedia may see favorable booking growth in Q3, as well.

Our forecast indicates that Expedia’s valuation is $125 per share, which is 31% higher than the current market price. Look at our interactive dashboard analysis on Expedia Earnings Preview: What To Expect in Q3? for more details.

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(1) Revenues expected to be slightly ahead of the consensus estimates

Trefis estimates Expedia’s Q3 2022 revenues to be around $3.7 Bil, slightly higher than the consensus estimate. In Q2, Expedia’s revenues grew 51% year-over-year (y-o-y) to $3.2 billion, driven by a 26% y-o-y jump in gross bookings to $26.1 billion.  Expedia also captured a 9% higher stayed average daily rates (ADRs) over Q2 2021. Similarly, the company saw a 21% growth in revenue per ticket from its smaller air travel services segment. The top line contributed to an adjusted EBITDA of $648 million, more than tripling from $201 million last year, and 14% higher than the pre-pandemic levels in Q2 2019. The company also saw its Lodging gross bookings grow 8% versus the second quarter of 2019. For the full year of 2022, we expect Expedia Revenues to grow 37% y-o-y to $11.8 billion.

Also, the U.S. unemployment rate remained near historic lows at 3.5% (as of Sept) and the employment cost index (measuring the growth of labor compensation) rose 1.2% through the September-ending quarter, easing fears of a deeper economic slowdown. Both of these factors point to an improvement in Expedia’s upcoming results going forward.

(2) EPS likely to beat consensus estimates 

Expedia’s Q3 2022 earnings per share (EPS) is expected to come in at $4.18 as per Trefis analysis, marginally beating the consensus estimate. In Q2, the travel company saw an adjusted EPS of $1.96, reversing a loss of -$1.13 in the period last year. EXPE overcame a 13% jump in the cost of sales due to higher merchant processing fees, customer service costs, and cloud costs as a result of increased transaction volume.

(3) Stock price estimate higher than the current market price

Going by our Expedia’s Valuation, with an EPS estimate of around $7.00 and a P/E multiple of around 17.8x in fiscal 2022, this translates into a price of $125, which is 30% higher than the current market price.

It is helpful to see how its peers stack up. EXPE Peers shows how Expedia compares against its peers on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.

With inflation rising and the Fed raising interest rates, Expedia has fallen 47% this year. Can it drop more? See how low can EXPE stock go by comparing its decline in previous market crashes. Here is a performance summary of all stocks in previous market crashes.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

 Returns Nov 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 EXPE Return 2% -47% -16%
 S&P 500 Return 0% -19% 72%
 Trefis Multi-Strategy Portfolio 0% -22% 208%

[1] Month-to-date and year-to-date as of 11/2/2022
[2] Cumulative total returns since the end of 2016

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