Shares of Expedia (NASDAQ: EXPE) were soaring Friday after the online travel agency delivered a strong fourth-quarter earnings report Thursday afternoon, beating estimates on the top and bottom lines and saying it would reinstate its dividend.
As of 11:34 a.m. ET, the stock was up 18.4%.
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Expedia, which has historically lagged behind rival Booking Holdings, delivered strong results during a time when growth in the travel industry seems to be slowing.
Gross bookings in the quarter jumped 13% to $24.4 billion on a 12% increase in room nights to 86.4 million. Revenue rose 10% to $3.18 billion, which edged out the consensus expectation of $3.07 billion. Bookings also grew in all three of its core consumer brands — Expedia, Hotels.com, and Vrbo — as a strong dollar has lured Americans to Europe, and cross-border travel in the Asia-Pacific region has been strong as well.
Bookings growth accelerated in both the B2C and B2B business channels as well; each improved by 5 percentage points.
Margins improved, sending adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) up 21% to $643 million. Adjusted earnings per share improved from $1.72 in the prior-year period to $2.39, which was better than the consensus expectation of $2.10.
“Our fourth quarter results exceeded expectations and reflect continued strong execution and better-than-expected travel demand,” said CEO Ariane Gorin.
Expedia also reinstated its dividend, which it suspended early in the pandemic, a further sign of confidence from management. Expedia will pay a $0.40 per share quarterly dividend starting in March.
Expedia expects its revenue growth to slow in the first quarter, which is seasonally its slowest quarter of the year, calling for 3% to 5% revenue growth on 4% to 6% bookings growth. It also said EBITDA margins would be flat to slightly up in the quarter. For the year, however, it anticipates record adjusted EBITDA.
Expedia has historically traded at a discount to Booking Holdings and Airbnb, as it has been a slower growing and less profitable business, but that could be changing. The company has an impressive set of brands and is executing well across the operation.
The stock looks reasonably valued at a trailing price-to-earnings ratio of 22.7 even after Friday morning’s gains.
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Jeremy Bowman has positions in Airbnb. The Motley Fool has positions in and recommends Airbnb and Booking Holdings. The Motley Fool has a disclosure policy.
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