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Why Sabre Stock Dropped Today

By Evan Niu, CFA - Feb 27, 2020 at 2:54PM

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The travel tech company reported fourth-quarter results and warned of a "material impact" in 2020 from the coronavirus outbreak.

What happened

Shares of Sabre (SABR 5.71%) have dropped today, down by 9% as of 3:10 p.m. EST, after the company reported fourth-quarter earnings. The travel tech specialist also announced strategic initiatives that it hopes will expand its addressable market.

So what

Revenue in the fourth quarter came in at $941.4 million, which led to adjusted net income from continuing operations of $44 million, or $0.16 per share. That bottom line was right on target with analyst expectations. The travel technology company said it would invest an additional $150 million in 2020 to develop an advanced travel marketplace that Sabre expects to reduce costs while increasing its addressable market.

Traveler wearing face mask while pulling luggage

Image source: Getty Images.

CEO Sean Menke said in a statement: 

We've already made bold moves aligning with these strategic initiatives, including our acquisition of Radixx, our continued desire to close the Farelogix acquisition and new collaboration plans with Accor. In addition, we are partnering with Google to facilitate our technology transformation and help unlock future revenue opportunities. There are 5 billion passengers boarded annually around the globe. Unlocking just one more dollar of value per passenger boarded potentially represents a $5 billion opportunity for the global travel industry. 

Now what

The ongoing coronavirus outbreak threatens to hurt Sabre's business as consumers travel less. "History shows that health epidemics have a material impact on global travel," CFO Doug Barnett said on the conference call with analysts.

"As we kick off 2020, a global health crisis related to the Coronavirus (COVID-19) is impacting travel bookings, but more importantly, the lives of many around the world," Menke added. "The situation continues to evolve, and while we hope its impact will be short-term in nature, Coronavirus will have a material impact on our 2020 financial results."

However, Sabre has not incorporated the coronavirus impact into its 2020 guidance, which currently calls for revenue to grow in the low single digits.

Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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