Shares of Expedia Inc. (NASDAQ:EXPE) tumbled last month as the online travel agency posted a disappointing fourth-quarter earnings report. The company missed analyst estimates on all accounts and issued weak guidance for 2018. According to data from S&P Global Market Intelligence, the stock finished February down 18%.
As the chart below shows, the decline came essentially in one session after the travel specialist reported earnings.
The parent of brands including Orbtiz, Travelocity, and HomeAway fell 15% on February 9 as the company said gross bookings increased 14% to $19.8 billion, driving an 11% increase in revenue to $2.32 billion, but that was below expectations of $2.36 billion. Growth at home-sharing site HomeAway was particularly strong for the year, increasing 46%, and room nights at its core brands, including Expedia and Hotels.com, were up 17%. Still, competition has been weighing on the online travel industry as a number of Expedia's peers posted disappointing results. For Expedia, that increased competition manifested itself in the form of a 16% increase in marketing expense, and operating income dropped 23% to $113.4 million. On the bottom line, adjusted earnings per share dropped from $1.17 to $0.84, well short of estimates at $1.15.
CEO Mark Okerstrom said:
Over the past several months, we have made key organizational changes, aligned our company around common objectives and began executing on a new direction aimed at accelerating the geographic expansion of our global travel platform.
Looking ahead, Expedia did not offer detailed guidance, saying only that it expected adjusted EBITDA growth of 6% to 11% as the company spends on migrating to a cloud platform, but that was better than 2017's 6% adjusted EBITDA growth. Still, the heavy spending that OTAs like Expedia, Trivago, and TripAdvisor have been forced to commit should pressure earnings for the foreseeable future. Investors have a right to be disappointed after last month's report as a stock with a P/E of 26 should be able to deliver better earnings growth than single digits.