Markets

Can Expedia (EXPE) Pull a Surprise this Earnings Season?

Expedia Inc.EXPE is set to report fourth-quarter 2015 results on Feb 10. Last quarter, the company posted a 16.8% negative earnings surprise.

Let's see how things are shaping up for this announcement.

Factors at Play

Expedia's third-quarter earnings missed the Zacks Consensus. However, revenues of $1.94 billion increased sequentially as well as year over year backed by healthy growth rates across most of the brands. Margins expanded from the year-ago period supported by higher volumes and improving mix of business despite higher costs related to transactions, data centers and acquisitions.

Expedia continues to grow both in the U.S. and internationally, driven by the secular growth in the online travel booking industry. The company continues to add inventory, especially in international markets, and growth rates support this move. At the same time, its leading position in the domestic market has been strengthened with higher inventory and strategic deals, which should boost results in the to-be-reported quarter.

However, Fx, increased investments in the business, intensifying competition across geographies and the lack of ADR growth in emerging markets could impact results in the fourth quarter.

Earnings Whispers

Our proven model does not conclusively show that Expedia will beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: The Most Accurate estimate stands at a loss of 87 cents, while the Zacks Consensus Estimate is pegged at a loss of 89 cents. Hence, the difference is -2.25%.

Zacks Rank: Expedia's Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident of a beat.

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks to Consider

You could consider the following stocks with a positive Earnings ESP and a favorable Zacks Rank:

Jack in the Box Inc. JACK , with an Earnings ESP of +1.94% and a Zacks Rank #1.

ARRIS International plc ARRS , with an Earnings ESP of +4.88% and a Zacks Rank #1.

AMN Healthcare Services Inc. AHS , with an Earnings ESP of +2.44% and a Zacks Rank #1.

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

EXPEDIA INC (EXPE): Free Stock Analysis Report

ARRIS INTL PLC (ARRS): Free Stock Analysis Report

JACK IN THE BOX (JACK): Free Stock Analysis Report

AMN HLTHCR SVCS (AHS): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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