Why Is TripAdvisor (TRIP) Down 8.3% Since Last Earnings Report?

It has been about a month since the last earnings report for TripAdvisor (TRIP). Shares have lost about 8.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is TripAdvisor due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

TripAdvisor Misses Q3 Earnings & Revenue Estimates

TripAdvisor Inc. reported adjusted third-quarter 2019 earnings of 58 cents per share, missing the Zacks Consensus Estimate of 69 cents. Also, the reported earnings decreased 19.4% from the year-ago quarter.

Revenues in the third quarter were $428 million, missing the Zacks Consensus Estimate by 6.2%. Moreover, the top line was down 6.6% year over year.

Revenue Segments

Starting first-quarter 2019, TripAdvisor revised the reporting structure into three segments: Hotels, Media & Platform, Experiences & Dining, and Other.

Revenues of $238 million (accounting for 56% of total revenues) from the Hotels, Media & Platform segment were down 12% from the year-ago quarter.

Revenues of $141 million from the Experiences & Dining segment, which accounted for 33% of total revenues, grew 19% year over year. The company will likely continue to invest in supply and marketing to accelerate E&D products, as well as drive attractive returns in the long run.

The Other segment contributed the remaining 11%. This segment includes revenues from rentals, SmarterTravel, Flights/Cruise and TripAdvisor China. Revenues from this segment were $49 million, down 30% from the year-ago quarter.

Operating Results

TripAdvisor’s adjusted operating expenses of $303 million were down 4.7% from $318 million a year ago. Per the press release, operating margin of 15.9% was also down 350 basis points from the year-ago quarter.

On a GAAP basis, the company’s net income was $50 million or 36 cents per share versus $69 million or 49 cents in the prior-year quarter.

Balance Sheet & Cash Flow

TripAdvisor exited the quarter with cash, cash equivalents and short-term investments of roughly $933 million, down from $966 million recorded in the second quarter. Accounts receivables were $218 million, down from $270 million in the second quarter.

Cash flow from operations was $1 million versus $181 million in the second quarter. Capex was $23 million, up from $21 million in the second quarter.

During the quarter, the company declared a special cash dividend of $3.50 per share and returned approximately $490 million of capital to its shareholders. 

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -6.78% due to these changes.

VGM Scores

At this time, TripAdvisor has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 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.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, TripAdvisor has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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