Expedia Earnings Preview: Will it Miss?
Growth Factors This Past Quarter
Though Expedia’s revenue in the fourth quarter was down sequentially, a stronger travel market all over the world, contribution from VIA and strategic expansion in Asia helped revenue exceed our expectations.
We believe that Expedia will continue to benefit from the acquisition of VIA Travel that closed in the second quarter of 2012. Bookings were down sequentially in the last quarter due to weakness across channels and geographies, but there could be improvements based on recent acquisitions and agreements that are likely to expand its addressable market. Weaker volumes also impacted margins in the last quarter.
Our proven model does not conclusively show that Expedia will beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Rank #1, #2 or #3 for this to happen. That is not the case here as you will see below.
ESP: The Most Accurate estimate stands at $0.05 while the Consensus Estimate is higher at $0.11. That is a difference of -54.55%.
Rank #3 (Hold): Expedia’s Rank #3 (Hold) when combined with a negative ESP makes surprise prediction difficult.
We caution against stocks with Ranks #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Other Stocks to Consider
Here are some other companies you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Applied Materials, Inc. (AMAT), Earnings ESP of +7.69% and Rank #2 (Buy)
Intersil Corp. (ISIL), with an ESP of +62.5% and a Rank #3 (Hold)
Amazon.com (AMZN), Earnings ESP of +100.0% and Rank #3 (Hold)