Orbitz Worldwide (OWW) Hits a Six-Year High

Shares of online travel booking site Orbitz Worldwide (OWW) surged to a six-year high last week, after the company reported strong second quarter earnings that topped analyst estimates. The company reported net income of $561,000, breakeven on a per share basis -- down from the $4.6 million, or $0.04 per share, it reported in the prior year quarter. However, the company's quarterly earnings included an $18.1 million write-off of deferred financing fees and other refinancing costs.

Revenue rose 12% to $225.8 million, topping analyst estimates of $219 million. Gross margin decreased slightly from 17.6% to 17.4%, as input costs rose 11%. Daily Chart
The company attributed that strong top line growth to higher hotel and vacation package sales. Orbitz's gross bookings rose 4% from the prior year quarter, thanks to higher airfares and more expensive hotel and vacation package bookings. In addition, the average stay at hotels increased 20% during the quarter. Orbitz owns its namesake website, along with CheapTickets and European company Ebookers. Orbitz also raised its full year sales guidance, and now expects revenue between $840 million to $850 million, up from a range between $810 million to $830 million. Adjusted EBITDA is now expected to rise 8% to 10%, up from a prior forecast between 5% and 10%. For the current quarter, Orbitz forecasts revenue between $214 million to $220 million, higher than the average consensus estimate of $214 million. Orbitz fared much better than its rival Expedia (EXPE), which plunged 25% on July 26 after its second quarter earnings completely missed analyst estimates. For its second quarter, Expedia's adjusted earnings came in at $0.64 per share, down from the $0.89 per share it earned in the prior year quarter. Analysts had expected the company to earn $0.79 per share. Revenue edged up from $1.04 billion to $1.21 billion, but missed the consensus estimate of $1.26 billion. Expedia's top and bottom line growth were taken down by a monstrous 33% year-on-year increase in sales and marketing costs, driven by a $128 million rise in direct costs. Mark Walton, the company's VP of strategy and account management, stated, "We see a continuing trend of travelers adhering to travel management policies and initiatives that save their companies money." He also highlighted the company's growth in mobile. "From booking to itinerary management to check in - and everything in between - we are encouraged to see travelers are demonstrating an increased reliance on our mobile solution at all stages of business travel." Although shares of Orbitz initially surged after earnings on Thursday, the stock sold off on Friday with the broader market. However, the stock remains up more than 250% over the past twelve months. Due to this quick ascent, some of the company's fundamental ratios are getting overheated. The stock is now trading at 33 times forward earnings with a whopping price-to-book ratio of 93.5, which suggests that the company needs to keep beating estimates to justify its lofty valuation. Other News About OWW Why Orbitz Shares Skyrocketed Why are investors so obsessed with Orbitz? Orbitz Shares Soarasit Raises Outlook Orbitz hits a six-year high. Other Stocks in the News Food Safety Concerns in China Could Fuel Zoetis' Growth Is China the key to Zoetis' future growth? A Closer Look at Pfizer's Three-Way Split Will streamlining operations solve Pfizer's problems? Copyright 2013 by InvestorGuide.com, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc. No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions. We are not responsible for claims made by advertisers and sponsors. Anyone who makes decisions based on what they read here does so at their own risk and cannot hold WebFinance Inc. (DBA InvestorGuide.com, Inc.) or its employees responsible.

Published on Aug 13, 2013
By Leo Sun
Leo Sun
Leo Sun is a freelance finance writer and position trader. He focuses on a combination of value and momentum investing, with a strong interest in the trading philosophies of Warren Buffett and Peter Lynch. Leo also has experience writing articles to help small business owners acquire loans and manage their finances. He regularly contributes to the Stock of the Day analysis.

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