Will Higher Expenses Hit TripAdvisor (TRIP) Q3 Earnings?

TripAdvisor Inc. (NASDAQ:TRIP) is slated to report third-quarter 2017 results on Nov 6. Last quarter, the company delivered a positive earnings surprise of 26.7%.

TripAdvisor does not have a decent surprise history. The company missed estimates in three of the trailing four quarters, with an average four-quarter negative surprise of 9.04%.

The company's shares have lost 17.0% year to date, underperforming the industry’s gain of 59.9%.

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

Factors to Consider

In the last reported second quarter, TripAdvisor’s average monthly unique visitors on the company’s branded websites and applications reached nearly 415 million, increasing 18% year over year. The number is expected to expand in the upcoming quarter driven by its rich content. The company offers more than 465 million travel reviews and opinions, growing at more than 290 contributions per minute. The Zacks Consensus Estimate for the upcoming quarter is pegged at $454 million.

TripAdvisor’s Hotel segment revenues of $326 million increased 4% sequentially and 3% from the year-ago quarter. The Zacks Consensus Estimate for the upcoming quarter is pegged at $328 million. Also, average monthly unique hotel shoppers reached 153 million, increasing 11% year-over-year and click-based and transaction revenues per hotel shopper decreased 2% year-over-year.

Lately, the company has been making efforts to get travelers to book hotels directly on its website instead of just using it as a review site. These efforts will continue to boost the company’s clicked-based advertising and transaction revenues, expanding its top-line growth in the upcoming quarter.

TripAdvisor’s Non-Hotel segment revenues of $98 million increased 69% sequentially and 31% from the year-ago quarter. The growth will continue to accelerate, driven primarily by continued strong traction of attractions and restaurant businesses.

However, mounting expenses due to new initiatives and investments are hurting the company’s profits. Also, management has been spending huge amounts on acquisitions. Though these continued investments could boost the top line, it can have a negative impact on the company’s near-term profitability.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. Sell-rated stocks (Zacks Rank #4 or #5) are best avoided.

However, TripAdvisor has a Zacks Rank #4 and an Earnings ESP of -10.31%.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

TripAdvisor, Inc. Price and EPS Surprise

TripAdvisor, Inc. Price and EPS Surprise | TripAdvisor, Inc. Quote

Stocks to Consider

You may consider the following stocks with the right combination of elements to surpass estimates this quarter.

NVIDIA Corp. (NASDAQ:NVDA) , with an Earnings ESP of +0.71% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Texas Instruments Incorporated (NASDAQ:TXN) , with an Earnings ESP of +0.42% and Zacks Rank #1.

Dorian LPG Ltd. (NYSE:LPG) with an Earnings ESP of +24.00% and a Zacks Rank #2.

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