Online travel agencies moved higher Wednesday after three of the largest players in the industry reported third-quarter earnings that didn't pull any major surprises, with leader IAC/InteractiveCorp showing profits more than quadrupled during the period.
The travel industry as a whole demonstrated it wasn't particularly hurt by the lack of business due to the wave of hurricanes that swept through the southeastern United States during the summer. IAC/Interactive, Priceline.com Inc. and Orbitz Inc. — the leaders in a sector that's seen massive consolidation during the past few years — all posted higher quarterly profits from the year-ago period.
Analysts signaled a general sense of relief that hurricanes Charley, Frances, Ivan and Jeanne didn't wreak more havoc on earnings reports from the three companies. Those companies that serve as a one-stop Internet shop for booking flights, hotels, and car rentals have been in the midst of a rebound as the economy has picked up.
"We can almost hear the collective sigh of relief across the Street as IACI reported third quarter results that met or exceeded expectations across virtually every metric," said Banc of America Securities analyst Michael Savner. IAC/Interactive is considered a bellwether for the group since it owns brands such as Expedia, hotels.com, Ticketmaster, and Citysearch.
The company posted net income of $89 million, or 12 cents per share, up from $19 million, or 2 cents per share. Excluding items, the company earned $181 million, or 24 cents per share — higher than the 21 cents per share projected by analysts polled by Thomson First Call.
Revenue fell to $1.5 billion, down 7 percent from $1.61 billion in the year-ago period. The drop in revenue came as the company changed how it accounts for sales at hotels.com.
"We were pleased with our profit performance this quarter. We managed our U.S. Travel operations to the bottom line, giving up a little top-line growth, as we work to improve our merchant hotel performance," said Diller, the company's chairman and CEO, in a statement.
The company said its travel business accounts for 70 percent of its profit, and saw an increase of 27 percent in operating income during the quarter to $174.9 million.
Priceline posted quarterly net income of $9.3 million, or 23 cents per share, up from $8.5 million, or 21 cents per share. Profit excluding items was 28 cents per share. Analysts projected earnings of 27 cents per share.
Unlike IAC/Interactive — which has a more diversified mix of business — Priceline said the storms had more of an impact on its sales. Revenue was $235.9 million, which didn't reach forecasts of $251.1 million or even the year-ago's $243.4 million.
Orbitz, the third-largest online reservations company, posted profit of $5 million, or 12 cents per share, up from $3.9 million, or 10 cents per share. Excluding merger-related charges and other items, the company would have posted earnings of $9.7 million, or 22 cents per share.
Revenue was $77.5 million, up 20 percent from $64.4 million last year. Hotel revenue also rose 72 percent on the year. Analysts expected earnings of 12 cents on revenue of $75.6 million.
The company's planned acquisition by Cendant is expected to close this month. The deal marks the latest in a number of transactions that have transformed the online travel industry during the past few years. IAC/Interactive purchased Expedia and bought out what it didn't already own of Travelocity. Priceline snapped up TravelWeb, RentalCars.com and Active Hotels.
Among the remaining few to not be snapped up is Travelzoo Inc., among the smallest names in the online travel business. The company's stock was up $10.53, or 12.76 percent, to $93 on the Nasdaq. The stock is up almost 1,900 percent since its 52-week low of $5, a move that has left many in the market somewhat mystified.
There has been speculation Travelzoo is being boosted by the success of Google Inc. The company also had a small float in its initial public offering, and there are pending plans for offering up to 1.5 million more shares.