With a pullback in its share price due to the recent stock market correction, Expedia, Inc. (EXPE) is now in value stock territory with a forward P/E of 14.9. This Zacks #1 Rank (strong buy) also has growth, as the company is expected to post double digit earnings growth in 2011.
Expedia operates online travel companies through several well-known brands including Expedia.com, Hotels.com, Hotwire, Venere.com, TripAvisor Media Group, luxury travel specialist Classic Vacations and eLong, China’s second largest online travel booking site, eLong.
Revenue Jumped 23% in the Second Quarter
On July 28, Expedia reported its second quarter results and beat the Zacks Consensus Estimate by 8.7%. Earnings per share were 50 cents compared with the consensus of 46 cents.
Revenue was $1.02 billion up from $834 million in the year ago quarter. It was boosted by a 21% increase in hotel room nights and a 27% increase in advertising and media revenue.
International revenue soared 45% (31% excluding foreign exchange) and accounted for 43% of worldwide revenue, up from 36% a year ago.
TripAdvisor saw third-party revenue climb 24% as it saw accelerated growth in cost per click (CPC) based on revenue and display advertising revenue. The company expects to shortly spin-off TripAdvisor.
Gross bookings jumped 19% year over year due to 15% growth in transactions, including rising average airline ticket prices and average daily rates for hotel rooms.
International bookings grew by 37% (22% excluding foreign exchange) to $3 billion. International bookings accounted for 38% of worldwide bookings, up from 33% in the second quarter of 2010.
Gross bookings growth for Hotels.com and Venere.com rose 54% compared with the second quarter of 2010.
Zacks Consensus Estimates Rise
Analysts like what they heard as 6 estimates rose for 2011 since the earnings announcement.
The 2011 Zacks Consensus Estimate jumped 9 cents to $1.80 per share in the last 80 days.
That is earnings growth of 17.1%.
Pullback Creates Opportunities
Shares took a dive in the recent market correction which has given value investors a chance to get in.
In addition to a P/E under 15, which is the cut-off I use for value stocks, Expedia also has a price-to-book ratio of 2.4. A P/B under 3.0 is usually considered a “value.”
In addition, Expedia has a solid 1-year return on equity (ROE) of 16.4%.
Expedia is growing as it increases market share in the international market but its valuations make it attractive to investors looking for a “value” play in the online travel sector.
Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Turnaround Trader and Insider Trader services. You can follow her at twitter.com/traceyryniec.
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