Online-travel agency Expedia beta on earnings but warned of a lower full-year profit from its discount travel website Hotwire due to higher car-rental rates and increased competition.
The online travel agency's shares dropped more than 7 percent after initially popping more than 4 percent. What is Expedia's stock doing now? (Click here for the latest after-hours quote.)
Expedia reduced its forecast for growth in organic earnings before interest, taxes, depreciation, and amortization (EBITDA) by $20 million-$30 million, citing weakness at Hotwire.
The company, however, reaffirmed its overall 2013 forecast for adjusted Ebitda of growth in the low double digits due to strong performance at trivago — a German travel site in which it acquired a majority stake earlier this year.
Expedia said troubles at Hotwire began with superstorm Sandy in October.
The recent consolidation in the car-rental industry made matters worse as it drove up rental rates, discouraging its price-sensitive customers, Expedia said on the call.
Hertz Global Holdings Inc bought smaller rival Dollar Thrifty last year for $2.6 billion, leaving just three players to control about 95 percent of the U.S. car-rental market.
"There certainly was incremental weakness in the first quarter (at Hotwire)," Chief Financial Officer Mark Okerstrom said on the call.
"With respect to the full year impact, we are basically forecasting that we do not see any material change from what we have seen to date. We have no reason to believe that things will get better."
He said Hotwire was also hurt by heavy advertising by its competitor. Expedia's rivals include Priceline.com and Orbitz Worldwide.
Expedia's adjusted net income fell to $35.3 million, or 25 cents per share, in the quarter ended March 31 from $36.9 million, or 26 cents per share, a year earlier.
Revenue jumped 24 percent to $1.01 billion.
Analysts on average had expected earnings of 23 cents per share on revenue of $967.7 million, according to Thomson Reuters.
The profit beat was due to strong growth in hotel bookings. Gross bookings increased 16 percent. Bookings for hotel rooms rose 28 percent, while those for air tickets increased 9 percent.
Expedia stock, which has more than doubled since the beginning of 2012, fell 5 percent to $61.77 in after-hours trading. The shares closed at $64.97 on the Nasdaq on Thursday.