(By Rich Bieglmeier) Expedia Inc. (EXPE) expects to report earnings after the market closes on Thursday, October 25, 2012. Wall Street anticipates Expedia will earn $ 1.26 for its third quarter. iStock expects the online travel company will report earnings that will exceed Wall Street's consensus number. The iEstimate is $1.33 – a 7 cents upside surprise.
Earnings announcements have been pretty explosive – oh, poor choice of words for a site with airline booking – for shareholders as of late. In the last two quarters, investors who traded EXPE for EPS watched their investment grow by 22.9 percent and 32.7 percent in the days surrounding earnings. "Holy Stock Pop, Batman."
In fact, big swings in the stocks, mostly to the upside, aren't uncommon for the NASDAQ 100 member. Over the last 16 quarterly checkups on seven occasions, the stock price moved by more than 10 percent; four up, three down. In fact, in 11 of the last 16 profit announcements, EXPE gained an average of 13.73 percent. The handful of times investors had their lunch handed to them, shares cut off 8.77 percent.
The stock chart looks sick heading into Thursday's announcement. EXPE's price nose-dived below its 50-day average, with the 12-day and 26-day averages in hot pursuit. Additionally, the MACD line moved into negative territory and broke support. There is price support at $50, and iStock wouldn't be surprised to see EXPE hit Ulysses before the 25th.
On the plus side, hitting $50 would "close" a gap down; so, it should act as firm support. Expedia's relative strength is borderline over sold, and the current price is two standard deviations below the 20-day moving average. In late-July, the online travel company produced a similar pattern prior to earnings, and then, "holy $%^#, batman," the stock popped 20 percent from close-to-close.
Expedia says it generates more than 70 percent of its revenue through the marketing and distribution of hotel rooms. According to HotelNewsNow.com, the hotel industry reported increases in all three key performance metrics – occupancy, average daily rate, and revenue per available room - during July, August, and September of 2012. In fact, July set a record with "104,957,596 rooms sold" in the U.S. With nearly 60 percent of its revenues generated domestically, the hotel segment should provide the room needed to bypass the street's consensus.
Internationally, the Olympics in London helped hotel metrics across the board in late-July and early August. You forgot about the games, didn't you? The metrics were weak in July across the Asia/Pacific region, but rebounded somewhat in August. September numbers aren't in yet.
Additionally, the dollar's summertime swoon - thanks to QEternity to Infinity – should also help the bottom line as international sales take up more of the revenue pie, 48 percent and growing. In the last quarter, costs remained fairly constant as a percentage of revenue, no red flags there.
Overall, iStock expects Expedia to post another solid quarter and its 16th bullish earnings surprise in its last 17 profit announcements. Earnings traders might consider speculating with November call options due to the stock's recent weakness and post-earnings price performance.