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Why Shares of Sabre Are Down Today

By Lou Whiteman - Feb 26, 2020 at 10:53AM

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The travel software company confirms that the coronavirus is going to materially affect 2020 results.

What happened

Shares of Sabre (SABR -4.25%) fell more than 15% on Wednesday after the travel software company said the coronavirus will have "a material impact" on its 2020 financial results, though it is not yet able to tell how big that impact will be.

So what

Sabre, a onetime subsidiary of American Airlines Group, still runs the back-end reservation systems for many airlines. With American and other airline stocks falling due to concerns the coronavirus outbreak will eat into travel demand, it is only logical that Sabre would feel the pinch as well.

Exterior shot of an airport with planes at the gate.

Image source: Getty Images.

Sabre on Wednesday reported fourth-quarter results in line with expectations but confirmed that the outlook for 2020 is uncertain due to the coronavirus. The company provided initial guidance for 2020 earnings of between $1.10 and $1.30 per share, with the midpoint below analysts' $1.24-per-share consensus, but said it has not yet incorporated the impact of the coronavirus into those results.

Airlines in late January canceled flights into China due to the country's virus-related shutdown, and in recent days, as the outbreak has spread to new regions, there has been growing concern that anxiety about the virus could cause a depressed summer travel season. If so, the impact of the coronavirus would last into the second half of the year, bringing down results for airlines and for companies like Sabre that serve them.

Now what

Even before the coronavirus outbreak, Sabre was having a hard time getting investors interested in its shares, with the stock basically flat over the five-year period leading up to Wednesday's earnings announcement and underperforming the S&P 500 by about 50 percentage points during that period.

The company has a plan to spur growth, having acquired Radixx to expand its services to low-cost airlines. It has also announced plans to build a full-service property management system with hotel giant Accor.

"The travel ecosystem is continuing to shift as the needs of our airline, hotel and agency customers change," Sean Menke, CEO of Sabre and the former head of Frontier Airlines, said in a statement. "We must continue to evolve retailing, distribution and fulfillment of travel to help our customers drive revenue growth and increase traveler loyalty."

That's all well and good, but it is going to take time to play out. Given the near-term uncertainty involving the coronavirus, investors on Wednesday aren't interested in waiting around to see what happens.

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