Shares of Expedia Group (NASDAQ: EXPE) were climbing today after the company posted better-than-expected results in the second quarter and investors looked past modest guidance for the third quarter.
As of 1:48 p.m. ET, the stock was up 10.1% on the news.
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Expedia benefits from low expectations
Like other online travel agencies including Booking Holdings and Airbnb, Expedia reported slowing growth as consumer spending on travel slows.
However, after both of those peer stocks fell on their earnings reports, low expectations seemed baked into Expedia's quarter.
Expedia reported a 10% increase in booked room nights to 98.9 million, and gross bookings were up 6% to $28.8 billion. Room nights on the Expedia brand jumped 20%, showing strength in the core brand. That helped drive revenue up 6% to $3.56 billion, which topped estimates at $3.53 billion.
That increase translated into solid growth on the bottom line with adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) up 5% to $786 million. On the bottom line, adjusted earnings per share jumped 21% to $3.51, easily beating estimates at $3.06.
CEO Ariane Gorin said, "Our second-quarter results came in at the high end of our expectations," but acknowledged, "In July, we have seen a more challenging macro environment and a softening in travel demand," which led to it cutting its guidance for the full year.
Expedia sees weakness ahead
The company sees revenue growth of just 3% to 5% in the key third quarter as customers are trading down to less expensive hotel rooms.
It also said full-year gross bookings would come in at the low end of its previous range, but saw EBITDA margin in line with 2023.
Given the dialed-down guidance, the gain in the stock seems surprising, but Expedia stock is cheap at a price-to-earnings ratio of just 12 and it's taking advantage of that discount with share buybacks, having repurchased $1.2 billion worth of stock this year. It's reduced shares outstanding by nearly 10% over the last year.
Investors seem to think that's a winning playbook even with slower growth ahead.
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Jeremy Bowman has positions in Airbnb. The Motley Fool has positions in and recommends Airbnb and Booking Holdings. The Motley Fool has a disclosure policy.
