Friday, July 31, 2020

Expedia Shares Travel South After Disappointing Q2

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News shaping
the markets today

     

What’s happening: Shares of Expedia Group plunged in extended trading on Thursday after the online travel giant reported its second-quarter results short of already-low estimates.

What happened: The pandemic resulted in Expedia Group missing out on the typically high-traffic summer travel season. The company swung to losses, with gross bookings tumbling by a whopping 90%.

Management gave a ray of hope to investors, however, by announcing that gross bookings had turned positive towards the end of the quarter.

How were the results: The online travel agency reported a decline in revenue and ended the quarter in the red.

  • Revenues declined by a massive 82% to $566 million, missing the consensus estimate of $635.75 million.
  • Expedia booked a loss of $753 million, or $5.34 per share, versus a profit of $183 million, or $1.21 per share, in the same quarter last year.
  • Adjusted loss came in at $4.09 per share, missing the consensus view of a loss of $3.83 a share.

Why it matters: The Seattle, Washington-based company had been under pressure even before the covid-19 outbreak in the US, mainly due to stiff competition from startups like Airbnb.

Uncertainty prevailed as Expedia shocked markets by ousting CEO Mark Okerstrom and CFO Alan Pickerill late last year. The company named its vice chairman Peter Kern as the new CEO and Eric Hart as CFO in April. The company also announced plans to cut 3,000 jobs in February, as part of a major restructuring.

The online travel company, which owns metasearch properties like CarRentals.com, Expedia.com, Hotels.com and Travelocity, raised $3.2 billion in April to survive the coronavirus crisis. Meanwhile, rivals TripAdvisor and Airbnb also trimmed their workforce by around a quarter and Booking Holdings applied for government aid.

Expedia’s total gross bookings for the quarter contracted 90% to $2.71 billion. However, the company witnessed some improvement on this front in May and June, with its vacation rental unit, Vrbo, leading the recovery as travelers began exploring mountains and lakes located within driving distance from their homes.

CEO Peter Kern said during the earnings call, “The second quarter of 2020 represented likely the worst quarter the travel industry has seen in modern history and Expedia was of course not spared.”

How shares responded: Shares of Expedia fell 3.7% to $81.75 in after-hours trading, following a 0.5% decline during regular trading hours. The stock has jumped around 20% over the past three months, although it is still down 21% year to date.

What to watch: With the company announcing an upturn in bookings as lockdown restrictions ease, investors will keep an eye on any positive news of a recovery in Expedia’s business. Markets remain concerned, however, about various states in the US re-imposing restrictions as covid-19 cases rise.

The Markets Today

     

The Canadian dollar will be in focus today, ahead of various economic reports scheduled for the day.

Context: The Canadian dollar declined to a one-week low versus the greenback on Thursday, following a drop in oil prices and the US economy shrinking by almost 33% in the second quarter.

Details: Crude oil prices declined yesterday, with the continued rise in covid-19 cases globally threatening to risk the recovery in oil demand. Also, the OPEC+ group appears set to lower the agreed reduction in crude output from August, which will result in excess supply if demand remains soft. Crude prices impact the loonie as Canada is a major exporter of oil to the US.

WTI (West Texas Intermediate) crude for September delivery dipped 3.3% to close at $39.92 per barrel.

On the economic data front, Statistics Canada’s Survey of Employment Payrolls and Hours showed that the number of people receiving a salary from employers declined by 4.1% in May.

The Canadian dollar fell 0.8% to close at 1.3445 versus the greenback, after declining to its weakest intraday level of 1.3453 since July 22.

What to watch: Traders await a basket of economic reports from Canada, including data on GDP, industrial product price index, raw materials price index and government budget value.

The Canadian economy, which contracted 11.6% in April, is expected to expand by 3.5% in May. Analysts expect the industrial product price index to rise 0.5% in June, versus a 1.2% increase in May. The raw materials price index is expected to rise 6.9% in June, after a 16.4% spike in May.

Investors will continue to monitor the covid-19 figures, with the total number of cases approaching 17.3 million globally.

Other Markets: European indices were trading higher at 8:30am GMT, with the FTSE 100, French 40 and Dax 30 index up by 0.3%, 0.4% and 0.4%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Italy’s retail sales as well as the US personal spending, personal income, employment cost index, Chicago PMI, University of Michigan's consumer sentiment Index and Baker Hughes crude oil rigs.