Monday, February 7, 2011

Expedia Inc. (NASDAQ: EXPE): Q4 Earnings Preview 2010

Expedia Inc. (NASDAQ: EXPE) is scheduled to release its fourth-quarter earnings after the closing bell on Thursday, February 10, 2011. Analysts, on average, expect the company to report earnings of 36 cents per share on revenue of $802.32 million. In the year ago period, the company reported earnings of 30 cents per share on revenue of $697.52 million.

Expedia, Inc., together with its subsidiaries, operates as an online travel company in the United States and internationally. The Company makes available on a stand-alone and package basis, travel products and services provided by numerous airlines, lodging properties, car rental companies, destination service providers, cruise lines and other travel product and service companies.

In the preceding third-quarter, the Bellevue, Washington-based company's net income was $176.6 million, or 62 cents a share, compared to net income of $117 million, or 40 cents a share, for the same period the previous year. On an adjusted basis, the company earned $191.3 million, or 66 cents a share, in the third quarter. Revenue grew 16% to $987.9 million. Analysts, on average, expected the company to report earnings of 62 cents a share on revenue of $944 million.

At its last earnings call in November, the company said that it continued to expect to deliver low double-digit OIBA growth for the full year 2010, with Q4 revenue and OIBA growth rates similar to Q3. The company has benefited from a rebound in travel spending. Online travel agencies enable travelers to compare fares for different airlines. Despite shrinking commissions in the form of distribution fees earned on air tickets, Expedia and other online travel agencies continue to focus on attracting air ticket bookings. Drawing customers through airline tickets enables them to sell other products like hotel stays, as well as destination services like car rentals or even cruises (for which they earn higher margins).

Early in January, Expedia dropped American Airlines (NYSE: AMR) tickets from its offerings, expanding a dispute the airline has with online travel agencies as it tries to cut fees. Expedia’s contract with American was due to expire in the next few months. American wants to cut costs by trimming the fees it pays to the global distribution systems. Expedia said in a statement that the system American has proposed “ is anti-consumer and anti-choice.” American Airlines, a unit of AMR Corp., is estimated to represent less than 2% of Expedia’s revenue, but the delisting raised concerns that a dispute between airlines and websites could further intensify and hurt profits. Also in January, Expedia reached a new multiyear agreement with US Airways Group Inc. to continue offering US Airways' full range of products and services, including all fares and inventory.

Recently, the company announced a multi-year strategic distribution agreement with WestJet, Canada's leading low-cost airline offering more than 400 daily flights to 70 destinations throughout Canada, The United States, Mexico and the Caribbean.

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