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Orbitz is
scheduled to report third quarter 2008 results after the market
closes on Monday, November 10. Based on our analysis, we at
eChristianInvesting are expecting OWW to report
disappointing results that fail to meet Wall Street’s consensus
expectations.
Analyst
Expectations
We are
forecasting revenues of $216.5 million and EPS of ($.01). This
would represent a 2% decrease in revenues from last year’s
$221.0 million in the same period. The current analyst consensus
calls for revenues of $226.4 million and $.01 EPS. The company
has given no guidance.
Expedia’s
disappointing quarterly results last week highlighted the
expected weakness in the travel sector. Although Priceline was
able to deliver better than expected quarterly results, they
clearly acknowledged the deteriorating global economic
conditions.
We expect
that Orbitz reliance on domestic travel could cause its
performance to falter even more than its more diversified peers.
In addition, the heavy debt load (currently $596M) saddled on
its balance sheet prior to going public will continue to hurt
the bottom line numbers. In this difficult credit environment,
an over-leveraged company like Orbitz has already seen its price
fall dramatically and will probably see more of the same in
coming months.
Going into
a very difficult 2009, we expect analysts to reduce their
estimates to show a decline in revenues. We also expect the
company to continue to post losses in 2009.
Share
Performance
To date,
Orbitz shares have fallen 63%. By comparison, the Dow Jones
industrial average has fallen 34% this year, and the Standard &
Poor's 500-stock index is down 38%.
Valuation
Shares are
now trading at .3x consensus 2009 revenue estimates. This has
been a very difficult year for travel stocks and we expect 2009
to be even more challenging. Although Orbitz’s stock price has
been battered this year and seems to have already priced in the
difficult economic conditions, we still feel that they represent
a distant third choice for investors looking to buy travel
stocks (behind Priceline and Expedia).
Recommendation:
Sell
At the time this article was published, the author did not have
a financial position in any of the stocks mentioned in this
article.
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