2nd UPDATE: Orbitz Sees Second-Half Momentum After 1Q Loss Narrows
May 03 2012 - 1:24PM
Dow Jones News
NEW YORK (Dow Jones)--After Orbitz Worldwide Inc.'s (OWW)
first-quarter loss narrowed more than expected on a shift in cost
timing, the company is looking forward to a partnership with
American Express Co. (AXP) to accelerate revenue growth late in the
year.
Chief Executive Barney Harford said the second half of the year
also should benefit from improved capabilities linked to Orbitz's
expensive tech upgrades last year and a focus on more-sophisticated
and efficient online marketing.
Shares in the company, which operates its namesake site as well
as CheapTickets and European-focused ebookers, were up 5.1% to
$4.10 a share in recent trading.
The American Express alliance is the most-significant new
partnership in what the online-travel company calls its
private-label business, in which Orbitiz delivers travel products
to customers of its private-label partners by building and
tailoring travel websites for them, supplying inventory and
providing customer service on bookings. It books the sales and then
shares revenue with the partners.
Chief Financial Officer Russell C. Hammer said the American
Express partnership would be the primary driver for revenue
acceleration in the back half of the year, speaking on a conference
call discussing first-quarter results.
Thursday, Orbitz forecast its top line likely would increase
more than analysts expected this year. Its outlook indicated
first-half sales growth of roughly 3% would later gain momentum for
create a full-year sales increase of 4% to 8%. That is largely
above the consensus expectation of analysts, who predicted a 4%
sales increase for 2012 according to a poll by Thomson Reuters.
Hammer said the partnership, officially launching in the third
quarter, would begin to show real revenue and earnings acceleration
starting in the fourth quarter.
But Orbitz's current-quarter outlook was tepid, partly because
costs from the Amex partnership shifted from the first quarter to
the second. Orbitz expects a decline in adjusted Ebitda, a
profitability metric standing for earnings before interest, taxes,
depreciation and amortization. Its revenue forecast bracketed the
analyst consensus.
The cost shift into the second quarter partially explains how
the bottom line in the first quarter exceeded expectations.
Orbitz's six-cent loss was narrower than the eight-cent loss
analysts expected, and adjusted Ebitda topped Orbitz's target.
Nonetheless, the loss also narrowed on growth in Orbitz's
European-focused travel business and stronger demand for hotel and
vacation packages. Its ebookers business, which focuses on European
travelers, recorded a 33% jump in the number of hotel-room nights
booked in the first quarter, helping lift room nights back to
rising after they slid throughout 2011.
Europe, though plagued by a sovereign-debt crisis and economic
uncertainty, has been a growth driver along with other
international markets as the U.S. business matures for online
travel agencies. Orbitz's exposure in Europe is largely in the
central and northern parts of the region rather than the weaker
southern European area.
Orbitz, however, relies on domestic and air travel more than
international and hotel business relative to its bigger
competitors, Expedia Inc. (EXPE) and Priceline.com Inc. (PCLN).
That weights Orbitz's results toward the areas of travel with the
most-plodding growth trends, though Orbitz has been working to
expand its hotel and international business.
Indeed, air revenue represented the biggest portion of Orbitz's
top line in the latest period, and it fell 0.4% while the smaller
hotel and vacation-package businesses had 9.5% and 17% revenue
gains, respectively.
Over all in the latest period, Orbitz reported a loss of $6.5
million, or six cents a share, compared with a year-earlier loss of
$10.9 million, or 11 cents a share.
Revenue rose 2.6% to $189.8 million. The company's forecast in
February called for revenue of $187 million to $193 million, which
was below analysts' estimates at the time.
Overhead costs rose 2.5%, slowing from the fourth quarter's 5.7%
increase and the third quarter's 17% rise. In February, Orbitz
completed an expensive technology-platform migration, the
investments for which had weighed on its bottom line last year.
-By Joan E. Solsman, Dow Jones Newswires; 212-416-2291;
joan.solsman@dowjones.com
--Mia Lamar contributed to this article.
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