TripAdvisor (TRIP) Q2 Earnings Beat Estimates, Revenues Lag

TripAdvisor Inc. (NASDAQ:TRIP) reported adjusted second-quarter 2017 earnings of 36 cents per share, surpassing the Zacks Consensus Estimate by a couple of cents.

However, earnings decreased 32.1% from the year-ago quarter and 5.3% sequentially. Also, revenues of $439 million were below the Zacks Consensus Estimate of $454.3 million.

Following the weaker-than-expected third-quarter earnings release, TripAdvisor’s share price declined more than 8% in the after-hours trading. Also, on a year to date basis, the stock has underperformed the industry it belongs to. It has gained only 22.3% compared with the industry’s rally of 59.3%.

Revenues

TripAdvisor’s quarterly revenues reflect an increase of 3.5% sequentially and 4.3% year over year.

In 2016, the instant booking rollout had led to significant revenue headwinds, muting revenue growth, thereby impacting profitability. 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 have led to an increase in the company’s advertising and transaction revenues, expanding its top-line growth in the quarter.

Revenue Segments

TripAdvisor reports revenues under two segments: Hotel and Other.

Revenues of $312 million from the Hotel segment decreased 4% sequentially and 3% from the year-ago quarter but made up 71% of the total revenues. This segment includes click, display, subscription and transaction-based revenues from hotels, air and cruise, including that from the company’s largest subsidiary, SmarterTravel, as well as from operations in China.

Revenues of $127 million from the Other segment increased 30% sequentially and 26% year over year and contributed the remaining 29% of the total revenues. This segment includes revenues from attractions, restaurants and vacation rentals businesses.

Revenues by Source

Revenues of $195 million from Click-based advertising decreased 5% from the year-ago quarter and accounted for 44% of the total revenues. Revenues from Display-based advertising increased 4% year over year to $76 million and brought home 17% of the total revenues. The other hotel revenue component was $41 million, flat from the year-ago quarter. However, it accounted for 9% of the total revenues. Non-Hotel revenue component contributed the remaining 30%, accounting for $127 million in revenues, up 26% year over year.

Operating Results

TripAdvisor’s adjusted operating expenses of $350 million increased 12.9% year over year. The adjusted operating margin of 9.6% was down 610 bps from the year ago-quarter.

On a GAAP basis, TripAdvisor’s net profit was $25 million or 18 cents per share, declining from the year-ago figure of $55 million or 37 cents.

Balance Sheet & Cash Flow

TripAdvisor exited the quarter with cash, cash equivalents and short-term investments of roughly $763 million, down from $904 million in the prior quarter. Accounts receivables were $254 million, increasing from $252 million in the last quarter.

Long-term debt was $265 million in the third quarter compared with $260 million in the previous quarter.

Cash flow from operations was ($135) million, decreasing from $221 million in the previous quarter. Capex was $15 million, down from $17 million in the second quarter. Free cash flow was ($150) million, decreasing from $204 million in the previous quarter.

TripAdvisor, Inc. Price, Consensus and EPS Surprise

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

Zacks Rank and Other Stocks to Consider

Currently, TripAdvisor has a Zacks Rank #4 (Sell). A few better-ranked stocks in the broader technology sector are NVIDIA Corporation (NASDAQ:NVDA) and SMART Global Holdings, Inc. (NASDAQ:SGH) , each sporting a Zacks Rank #1 (Strong Buy), while Applied Materials, Inc. (NASDAQ:AMAT) , carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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