Expedia Jumps After Projecting ‘Double-Digit’ Profit Growth

(Bloomberg) -- Expedia Group Inc. gave a 2020 profit forecast for “double-digit” growth, topping analysts’ estimates and suggesting the company will be able to maintain bookings in the face of slowing global travel demand caused by the spreading coronavirus. Shares gained more than 10% in extended trading.

The online travel giant reported revenue gained 7.3% to $2.75 billion in the fourth quarter, just missing the $2.77 billion analysts’ projected. Gross bookings climbed 5.9% to $23.2 billion in the period ended Dec. 31, the Seattle-based company said Thursday in a statement.

Adjusted earnings before interest, taxes, depreciation and amortization was $478 million, beating the analysts’ average estimate of $451.6 million, according to data compiled by Bloomberg.

“We are not providing a specific guidance range given uncertainty on how much cost savings we’ll recognize this year and the full effect of coronavirus,” Chairman Barry Diller and vice chairman Peter Kern said in the statement. “However, taking these factors into account, we expect 2020 Adjusted EBITDA growth to be in the double-digits.”

The pair said they were targeting $300 million to $500 million in “run-rate cost savings across our business.”

Diller said the company will streamline and simplify the business. “For several years we have really lost clarity and discipline,” he said on a conference call with analysts. “We were a bloated organization.”

Shares jumped to a high of $124.25 in extended trading after closing at $110.59 in New York. The stock has dropped 13% in the past 12 months.

The recent outbreak of the coronavirus, known as Covid-19, which originated in China and has spread to more than 20 countries, is battering hospitality companies from airlines to hotels to cruise operators as tourists cancel trips and businesses shutter events. The virus will dent the company’s bottom line by $30 million to $40 million in the current period, executives said on the call. However, Diller conceded the economic impact is difficult to predict.

“We don’t truly know the extent of it,” Diller said, adding shortly after that he believes “it will go beyond Asia.”

The health crisis is one of several challenges facing the company since Chief Executive Officer Mark Okerstrom and Chief Financial Officer Alan Pickerill were ousted in December after clashing with the board over prospects for growth. Diller said the company isn’t hunting for a new CEO. Instead, the 78-year-old billionaire media mogul will remain in control of the company’s day-to-day operations, along with Kern, for the foreseeable future -- but not beyond 2020.

“I haven’t been on one of these analyst calls in endless amount of time so I’m probably a bit draggy,” said Diller, who is chairman and founder of IAC/InterActiveCorp. “Having been chairman of Expedia for, I don’t know, I think 20 years or so, I thought I knew a lot about the company, but there is nothing like being on the ground. And we’ve been on the ground.”

In November, Okerstrom lowered the outlook for 2019 earnings after missing analysts’ estimates in the third quarter. Expedia largely blamed Google, which has been cramming the top of its search results with more advertising, pushing down free listings from travel companies and forcing them to spend more on marketing.

Diller said he has reached out to Google’s senior management, telling them “exactly what we feel about this. “I have implored them to stop actually taking away the profits from businesses that are one of the main contributors to their advertising revenue.”

Diller called for the federal government to regulate Google, saying the new search engine optimization changes were an “existential issue” for online travel agencies. The Federal Trade Commission and the U.S. Justice Department already have announced broad antitrust reviews of the major tech companies, including Alphabet Inc.’s Google.

Expedia has been squeezed by Airbnb Inc. and Booking Holdings Inc. in vacation home rentals -- the fastest growing sector of the travel market. Last year, the company revamped its short-term rental unit Vrbo to try to catch up with its rivals. Vrbo reported revenue growth of 13% in the fourth quarter to $259 million. The unit generates about 10% of Expedia’s total revenue, but analysts and investors focus on Vrbo because it represents the company’s best bet for growth.

In the fourth quarter, net income rose to $76 million. Profit, excluding certain items, was $1.24 a share, beating analysts’ average estimate of $1.14.

(Updates with coronavirus impact in the eighth paragraph; comments from chairman throughout.)

To contact the reporter on this story: Olivia Carville in New York at ocarville1@bloomberg.net

To contact the editors responsible for this story: Molly Schuetz at mschuetz9@bloomberg.net, Andrew Pollack

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