Sabre (SABR) Q2 Earnings Top Estimates, Revenues Up Y/Y

Sabre Corporation (NASDAQ:SABR) reported second-quarter 2019 adjusted earnings per share of 24 cents, which decreased 35% on a year-over-year basis. However, the figure surpassed the Zacks Consensus Estimate of 22 cents.

Revenues came in at $1 billion, up 1.6% from the year-ago quarter. The figure also beat the consensus estimate of $994 million. Growth across each of its business segments drove results.

However, increased technology expenses due to high cloud migration-related costs, decline in technology capitalized expenditures, modest growth in Travel Network incentive expense per booking, and acquisition-related costs weighed on margins.

Revenue Details

Travel Network revenues increased 0.7% year over year to $724.6 million. The growth was backed by 0.3% increase in transaction revenues. Increase of 0.9% in bookings drove results for this segment. Incentive expense per booking also grew moderately.

Airline Solutions revenues came in at $211.8 million, marking an increase of 3.4% from the year-ago quarter. AirVision and AirCentre revenues increased 14.7%. SabreSonic revenues declined 3.0% due to the impact of insolvency of Jet Airways and volume reductions at a certain carrier due to a 737 MAX incident, and the demigration of Pakistan International Airlines. A 7.8% year-over-year decline in passengers boarded was also a headwind to SabreSonic revenues.

Hospitality Solutions revenues jumped 8.1% year over year to $73.9 million, driven by 28.1% growth in central reservation system transactions.

The second quarter marked the sixth consecutive quarter of strong gains in Sabre’s share in the Global Distribution System market. Bookings grew 8% in North America.

Moreover, Sabre’s SaaS airline solutions continue to gain momentum.

Margin Details

Adjusted gross profit came in at $350.4 million, down 6.2% from the year-ago quarter. Adjusted gross margin contracted 292 basis points (bps) to 35.04% due to increased technology costs and Travel Network incentives.

Adjusted operating income decreased 26.2% year over year to $127 million. Adjusted operating margin of 12.7% fell 480 bps.

Adjusted operating income for the Travel Network fell 18.5% due to increase in incentive-related expenses and technology costs.

Adjusted operating income for Airline Solutions decreased 0.7%.

Hospitality Solutions incurred an adjusted operating loss.

Balance Sheet and Cash Flow

Sabre ended the quarter with cash and cash equivalents of $396.85 million compared with $459.5 million in the previous quarter.

Cash provided by operating activities decreased to $152 million from $724.8 million sequentially.

Free cash flow was $105.7 million for the second quarter compared with $114.1 in the first quarter.

During the quarter, $45.5 million worth of shares were repurchased. Including dividends, Sabre returned $83.8 million to shareholders.

Guidance

Revenues for full-year 2019 are expected to be in the range of $3.97 billion to $4.05 billion. This indicates 3-5% growth. The Zacks Consensus Estimate stands at $3.99 billion.

Adjusted earnings per share are expected to be between 91 cents and $1.05.

Free cash flow is likely to be approximately $455 million.

Zacks Rank and Key Picks

Sabre currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A few better-ranked stocks in the broader technology sector are Rosetta Stone (NYSE:RST) , Anixter International (NYSE:AXE) and Alteryx (NYSE:AYX) , each flaunting a Zacks Rank #1.

Long-term earnings growth rate for Rosetta Stone, Anixter and Alteryx is currently projected to be 12.5%, 8% and 13.7%, respectively.

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