Priceline Soars, Expedia Lands In Hudson River (PCLN, EXPE, OWW)

It seems that the insatiable growth in online travel bookings might have reached the point that the crumbling economy has caught up to it.  It seems that the name your own or bid your own prices at Priceline.com Inc. (NASDAQ: PCLN) is still a winner as times get tougher and travel sources might be more likely to give tickets and bookings away for cheaper discounts.  But shares of Expedia Inc. (NASDAQ: EXPE) are taking a pounding this morning after the online travel service reported earnings with a writedown that is nothing short of staggering.

Expedia took a $2.76 billion write-down to its goodwill.  The company even amended one of its credit agreements so it wouldn’t be in violation of provisions, which would have kicked in at about half of that most recent write-down levels.  And to top it off, it is seeing weaker demand for its hotel bookings and flight bookings.  Expedia’s loss was at -$9.60 EPS after the writedown.  Excluding the items, Expedia would have posted earnings of $0.22 EPS.  This is down from $0.32 EPS before and under the $0.24 estimates from Thomson Reuters.  Revenue was off more than 6% to $620.8 million, also under estimates of about $631 million.  The gross bookings are down about 11% here with the hit coming in both hotels and in airline tickets.

The winner here is Priceline.com Inc. (NASAQ: PCLN) with its quarterly earnings up 1% to $0.73 EPS.  Excluding items, the company posted earnings at $1.29 EPS on a 21% revenue jump to $406 million.  Thomson Reuters had estimates at $1.05 EPS on $377.8 million in revenue.  Its quarterly bookings were up 31%, and even after currency impact the international side was up 28%.  Its earnings forecast is also running well at $0.85 to $0.95 EPS on a 5% to 10% revenue gain.  Consensus estimates are $0.81 EPS.

The reactions to the news this morning are almost entirely inverse.  Priceline is up 15% at $79.61 before the open, and its 52-week range is $45.15 to $144.34.  Expedia shares are down over 10% (but had been worse) at $7.65 before the open, and its 52-week range is $6.00 to $25.50.

Orbitz Worldwide Inc. (NYSE: OWW) has a very similar model to Expedia, and it is set to report earnings next week on February 24.

Jon C. Ogg
February 19, 2009