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Consumers appetite for travel is reaching new heights after years of waning demand. Earnings this season have highlighted the recent trend with major hotel operators, airlines and cruise liners all reporting better-than-expected earnings. But that hasn't been the case for online travel agencies.
Last week, Expedia delivered disappointing results largely due to higher promotions, increased discounting, and falling demand in Europe. First-quarter results saw earnings decline 7 percent to 83 cents per share, 7 cents higher than the Estimize consensus data. But revenue missed forecasts by over $50 million, which caused the stock to tumble shortly after its report.
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Management stated that higher promotions and discounts led to a 5-percent decline in revenue per room night for the quarter. Travel demand to mainland Europe has tailed off significantly after the recent terror attacks in France, Belgium and Germany. Those trends could be echoed when peers TripAdvisor and Priceline report results this week.
After the closing bell on Wednesday, TripAdvisor takes the stage with the hope that it won't follow in Expedia's footsteps. Analysts are looking for earnings per share of 42 cents on $408.04 million in revenue. Earnings per share estimates have been cut considerably since TripAdvisor's last report and now reflect a 23-percent decline from a year earlier. Revenue on a year-over-year basis is anticipated to jump 1 percent, a notable increase from the 3-percent decline last quarter.
TripAdvisor has had a number of factors work in its favor this quarter. Initiatives like Instant Bookings have started to gain traction in both domestic and international markets. Customers around the world can now seamlessly book hotels through TripAdvisor, adding a potentially new layer of revenue moving forward. The company has also built up its mobile products, expanded into restaurant reservations and worked on effectively engaging and growing its user base.
The biggest downside continues to be the increasingly stiff competition. TripAdvisor doesn't appear to be closing the gap on Expedia and Priceline any time soon. If anything, the two companies are widening their reach and consolidating the industry through frequent acquisitions.
Priceline caps off the week with results this Thursday. The company is coming off a better-than-expected first quarter, during which results topped expectations on both the top and bottom line. Investors shouldn't assume a repeat performance though. Both revenue and EPS targets have been lowered considerably in the aftermath of the Brexit vote.
Analysts are now calling for earnings per share of $12.79, up 4 percent from the same period last year, according to crowdsourced data. That estimate has dropped 17 percent since Priceline's last report in May. Revenue is anticipated to jump 14 percent to $2.6 billion, marking a second consecutive quarter of double-digit gains.
In recent months, Priceline has been in the hot seat. The initial sign of trouble came during the company's first-quarter earnings call when management issued weak guidance, cautioning investors of difficulties ahead. However, the bigger concern came in late June when the UK voted to leave the European Union, which sent major currencies plunging. Priceline currently generates more than two-thirds of its revenue from Europe, so this could be a major blow for earnings in the near future.
Long term, Priceline still has considerable upside. The company's investment in Chinese travel company Ctrip and the handful of acquisitions made in recent years will be important sources of revenue moving forward. Investors will likely need to withstand a few down quarters before reaching potentially better results in the future.
How do you think these names will report? Be included in the Estimize consensus by contributing your estimates here!