It has been about a month since the last earnings report for Sabre (SABR). Shares have lost about 56.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Sabre due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Sabre Earnings Miss Estimates in Q4
Sabre Corporation reported fourth-quarter 2019 adjusted earnings per share of 16 cents, which declined 52.9% on a year-over-year basis. Moreover, the bottom line lagged the Zacks Consensus Estimate by 5.88%.
Revenues came in at $941.4 million, up 1.9% from the year-ago quarter. However, the top line missed the Zacks Consensus Estimate of $945 million.
Growth across all its segments drove the results. However, macroeconomic headwinds affected the top line.
Travel Network revenues increased 1.2% year over year to $693.1 million. However, softer Global Distribution System environment remained an overhang. Bookings increase of 1.2% drove this segment. Strong North American bookings growth offset a decline in international bookings.
Airline Solutions revenues came in at $207.6 million, up 2.8% from the year-ago quarter, primarily driven by 10% growth in AirVision and AirCentre revenues.
SabreSonic revenues declined 1% due to the impact of insolvency of Jet Airways and volume reductions at a certain carrier owing to a 737 MAX incident, and the demigration of Pakistan International Airlines, Philippine Airlines, and Bangkok Airlines. However, year-over-year growth of 2% in passengers boarded, primarily driven by Radixx, was a relief.
Hospitality Solutions revenues jumped 7% year over year to $71.4 million, driven by 7% growth in SynXis Software and Services revenues.
The fourth quarter marked the eighth consecutive quarter of strong gains in Sabre’s share in the Global Distribution System market. Global share grew 180 basis points (bps). Moreover, bookings improved 5% in North America.
Moreover, Sabre’s SaaS airline solutions gained momentum.
Additionally, Sabre completed the acquisition of low-cost carrier PSS solutions provider Radixx.
Adjusted gross profit came in at $321.9 million, down 11.9% from the year-ago quarter. Further, adjusted gross margin contracted 530 bps to 34.2%.
Adjusted operating income decreased 38.2% year over year to $97.6 million. This can primarily be attributed to high technology expenses related to lower capitalization rate, and increased D&A from previous capitalization.
Adjusted operating income for the Travel Network fell 17.2% due to impact of shift in capitalization mix.
Adjusted operating income for Airline Solutions decreased 39.2%.
Hospitality Solutions incurred adjusted operating loss.
Balance Sheet and Cash Flow
Sabre ended the quarter with cash and cash equivalents of $436.2 million compared with $473.4 million in the previous quarter.
Cash provided by operating activities increased to $156.9 million from $166.7 million sequentially.
Free cash flow was $133.9 million for the third quarter compared with $141.8 in the prior quarter.
During the full-year 2019, $77.6 million worth of shares were repurchased. Including dividends, Sabre returned $231.1 million to shareholders.
For the full-year 2019, Sabre’s total revenues increased 2.8% year over year to $3.975 billion, and adjusted earnings of $1.01 per share decreased 34.4% year over year.
Sabre announced an expected commitment of $150 million of additional technology investments in 2020 to support its technology transformation strategy to increase addressable market and reduce long-term costs.
Adjusted earnings per share are expected between $1.10 and $1.30. Including the technology spend, the figure is expected in the range of 50-70 cents per share.
Revenues for the full-year 2020 is expected to witness low single-digit growth.
Moreover, the global health crisis related to coronavirus is expected to affect travel bookings in 2020. The issue is expected to have a $100-$150 million impact on revenues in 2020.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -142.86% due to these changes.
Currently, Sabre has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Sabre has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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