Will TripAdvisor Earnings Give Shares Another Big Lift?

Image: TripAdvisor.

The travel industry has become a hotbed of consolidation lately, with many of the sector's biggest players looking at strategic combinations to bolster their overall reach in a favorable economic environment in the U.S. market. For travel-review website TripAdvisor (TRIP 0.31%), last quarter's financial report generated positive momentum for the stock, helping it to recover from its lows of the year. Yet as the company prepares to announce its first-quarter results Wednesday afternoon, TripAdvisor shareholders wonder whether the travel specialist will be able to cash in on greater anticipated travel activity while keeping up with its rivals. Let's look more closely at what's been happening with TripAdvisor over the past quarter and what we're likely to see in its report.

Stats on TripAdvisor

Source: Yahoo! Finance.

Can TripAdvisor earnings finally satisfy investors?
Investors have reduced their expectations about TripAdvisor earnings in recent months, cutting their first-quarter projections by a dime per share and making cuts of around 10% from their 2015 and 2016 full-year estimates. The stock has done well, though, climbing 18% since late January.

TripAdvisor's gains for the quarter all came in the wake of its fourth-quarter financial report, in which the company reported solid growth and encouraging prospects for 2015. Revenue for the quarter jumped a better-than-anticipated 35%, with earnings seeing an even healthier 73% rise. Conditions were extremely good in the domestic market, but TripAdvisor also saw pockets of strength in the international arena as well, posting unexpectedly solid results in Latin America and Europe.

Yet at least from the viewpoint of most of those following the company, TripAdvisor's earnings growth won't be able to come close to keeping up its breakneck pace from the fourth quarter. Higher acquisition costs and greater spending on advertising could eat into its results, and the traditionally slow winter months could take a further hit from unusually cold weather in much of the eastern U.S. earlier this year.

Image: TripAdvisor.

Investors will also be watching TripAdvisor closely to see how the company responds to the ongoing wave of consolidation elsewhere in the industry. Back in February, Expedia (EXPE 0.17%) announced that it would acquire Orbitz Worldwide (NYSE: OWW), creating a huge travel company big enough to rival industry leader Priceline (PCLN 0.40%). With two behemoths going head-to-head in online travel, TripAdvisor will need to come up with a viable strategy to prevent it from getting shut out, playing up the value-adding proposition from its traveler reviews and information database on things to do in popular destinations.

Meanwhile, TripAdvisor has kept working on ways to make its offerings more accessible. With the plunge in the value of the euro compared to the U.S. dollar, TripAdvisor has created tools to help travelers assess European prices and come up with a list of most desirable destinations based on price. Increased travel activity based on currency exchange rates probably won't materialize in full until the seasonally active summer months, but the more that TripAdvisor can do now to tap into the coming trend, the more likely it is to benefit from it. TripAdvisor has also moved forward with a new app for the Apple Watch, using the device's GPS tracking to offer glances at nearby points of interest as well as giving walking directions to restaurants, hotels, and other destinations.

In the TripAdvisor earnings report, investors should look at the company's financial condition, but it's also vital to pay close attention to the strategic vision of the travel specialist's executive team. With the departure of CFO Julie Bradley, TripAdvisor shareholders want assurances that the departure was truly for personal reasons rather than concerns about the stock's financials. Moreover, with acquisition activity having been such a big part of TripAdvisor's past and the industry as a whole, notes on further buyouts down the road could point toward TripAdvisor's direction not just this quarter but well into the future.