Expedia Scores S&P Rating Upgrade (EXPE)

The travel sector may still be complaining about softness and  a spotty recovery, but things are getting better financially at Expedia Inc. (NASDAQ: EXPE).  It turns out that Standard & Poor’s Ratings Services gave the debt rating an upgrade, and now the company is classified as an investment grade company.  The reasons for the upgrade were cited as a conservative fiscal policy, a solid operating performance, and strong financial results.

The raise was by two notches, up to to ‘BBB-‘ from ‘BB’ and the upgrade watch has been removed now as a result of today’s action with a “stable” outlook. Also noted today was a market leadership position, strong brand recognition and  high cash flows.  These all offset a competitive landscape.  Another benefit is that the online travel sector has held up and some areas have grown despite the contraction seen in other parts of the the travel industry.

One issue that was not a real drag was a drop in half for its earnings, partly offset as revenues were only off about 3%.  Those were above expectations, which helped.  The research also noted that Expedia is not expected to take on new major debt to fund an acquisition.

We will have to see how the balance sheet comes in after the next earnings report.  We noticed an increase in cash, but this company is still leveraged by our count.  Expedia’s stock is up 2.7% at $25.71 and the market cap is now listed as $7.4 billion.  Shares hit a new 52-week trading high today of $25.98 before pulling back from highs.

JON C. OGG