Why Shares of Orbitz Worldwide, Inc. Skyrocketed

Is this meaningful or just another movement?

Feb 13, 2014 at 12:15PM

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Orbitz Worldwide (NYSE:OWW) were taking off today, gaining as much as 32% after the company turned in a better-than-expected fourth-quarter earnings report.

So what: The travel-accommodations website delivered per-share earnings of $0.05, better than estimates of breakeven, while revenues increased 4.1% to $197.4 million, also beating the consensus at $191.2 million. Sales in the quarter were boosted by its hotel division, which grew 18%, while airline ticket sales fell 11%. Orbitz and its competitors have been increasingly turning to hotel reservations to drive bottom-line growth as they're more profitable than airline tickets. The fourth quarter also tends to be a seasonally slow one for Orbitz, so investors seemed happy that the travel service was able to squeeze out a profit. CEO Barney Harford said he expected "strong growth" in 2014 and beyond.

Now what: Despite Harford's optimism, Orbitz's first-quarter guidance was actually off the mark at $202 million to $207 million against analyst estimates of $207 million. For the year, the company expects revenue growth in the low-to-mid single digits, in line with estimates of a 3.7% increase. Orbitz has been an especially volatile stock lately, having tripled in the past year but still off nearly 30% from its high this summer. The travel bookings industry is extremely competitive, and Orbitz seems to be stuck in the middle of the pack with slow top-line growth and slim profits. Even with today's bounce, I wouldn't expect shares to see that $12.62 high anytime soon. 

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4 in 5 Americans Are Ignoring Buffett's Warning

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Jun 12, 2015 at 5:01PM

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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