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Can Expedia’s Revenue Growth Continue to Beat Its Peers in 2016?

Ally Schmidt

Expedia's 1Q16 Earnings Analysis: Outpacing Its Peers

(Continued from Prior Part)

Gross bookings see strong growth

Expedia’s (EXPE) first quarter gross bookings grew by 32% year-over-year (or YoY) to $18.9 billion. Orbitz Worldwide (OWW), acquired by Expedia in 2015, contributed $2.7 billion in gross bookings. Its core OTA (online travel agency) grew by 33% to $17.2 billion and its Egencia business grew by 21% to $1.7 billion.

The strong performance at Brand Expedia and Hotels.com helped boost its OTA bookings. Domestic bookings grew by 38% YoY and international bookings grew by 22% YoY.

Strong dollar has negative impact

The US dollar has continued to remain strong in 2016 amid the growing global turmoil. Expedia earns almost 41% of its revenues from its international business, where it earns in local currencies. This means lower revenues when translated to dollars.

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However, the impact has been reduced as compared to 2015. For 1Q16, EXPE had a foreign exchange impact of -2% on revenues against a -5% impact in 4Q15.

Acquisitions help Expedia’s revenue growth

Acquisitions and strong growth in bookings offset the impact of the strong dollar. As a result, revenues grew by 39% YoY during 1Q16 (42% excluding eLong). This includes 38% growth in international revenues and 45% growth in domestic revenues. However, acquisitions made in 2015 contributed to 28% of Expedia’s revenue growth.

Outlook

Expedia’s growth is dependent on global travel demand, which is expected to grow by 6.7% for 2016 according to IATA (International Air Transport Association). This is despite the uncertain global macroeconomic environment. Higher travel demand could mean higher revenues for Expedia.

However, Expedia expects the headwinds from a strong dollar to continue in 2016, adversely impacting its revenue.

EXPE makes up 2.8% of the First Trust Dow Jones Internet Index ETF (FDN). Its rivals include Priceline (PCLN), TripAdvisor (TRIP), and Ctrip.com (CTRP). For a complete overview of Expedia, please read An Investor’s Complete Guide to Expedia.

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