Expedia third-quarter profit beats estimates, sees Orbitz deal boost

Reuters News
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Posted: Oct 29, 2015 4:21 PM

By Jeffrey Dastin

(Reuters) - Expedia Inc on Thursday posted a rise in third-quarter profit that beat analysts' estimates and said it now expects its takeover of Orbitz Worldwide Inc to yield greater benefits than previously anticipated.

Expedia, the world's largest online travel services company by bookings, earned $283 million in the quarter, up 10 percent from a year earlier. On an adjusted basis, it earned $276 million, or $2.07 per share, compared to the average analyst estimate of $265 million, or $2.02 per share, according to Thomson Reuters I/B/E/S.

The stock surged 7.6 percent in after-market trade.

The value of bookings on Expedia sites was $15.4 billion in the quarter, a 21 percent rise from a year ago when excluding a business the company recently sold, eLong. The company owns sites such as Travelocity and Hotels.com.

Expedia Chief Financial Officer Mark Okerstrom said in an interview that the company expects a "meaningful" increase in savings and revenue above the $75 million per year it earlier expected would come from the Orbitz buyout.

The $1.3 billion deal closed last month.

Orbitz sites will have access to hotel, rental car and cruise listings from Expedia, boosting revenue as its customers gain more options for booking, Okerstrom said.

He added that savings will come as Expedia cuts staff and legal and audit services that Orbitz will no longer need as an unlisted company.

However, Expedia reported it will incur restructuring charges of up to $30 million in the fourth quarter and up to $50 million in 2016 related to the integration of Orbitz and the Wotif Group, which it purchased in 2014.

The company narrowed its forecast for this year's growth in adjusted earnings before interest, taxes, depreciation and amortization to between 12 percent and 15 percent, from prior guidance of a rise between 10 percent and 15 percent. Both forecasts exclude eLong.

Chief Executive Dara Khosrowshahi said on an investor call that apartment-sharing startup AirBnB has had an "immaterial" impact on Expedia's business, although excess inventory has pressured prices in some markets.

He said listings of apartment rentals will become "incrementally" important in coming years as Expedia competes for the customers that use AirBnB, who typically are younger and more price sensitive.

Cowen and Co analyst Kevin Kopelman said in a research note Thursday that AirBnB could pose a greater threat to the likes of Expedia by 2018, if AirBnB reaches its revenue targets.

(Reporting by Jeffrey Dastin in New York; Editing by Christian Plumb and Cynthia Osterman)