Expedia Inc, the largest online travel agency, posted a quarterly profit on stronger bookings, but the results were weaker than expected and its shares tumbled 10.5 percent.
Fourth-quarter profit per share, excluding one-time items, of 32 cents fell short of analysts' average estimate of 36 cents according to Thomson Reuters I/B/E/S.
The results exclude the negative impact of a higher tax rate and increased interest expense. With those factored in, Expedia said on Thursday its quarterly profit slipped 30 percent to $71.3 million, or 25 cents per share, from a year ago.
Despite the stock sell-off, Morningstar analyst Warren Miller said Expedia's fundamentals look good.
If you look at pretty much everything they have control over -- revenue and operating costs -- it wasn't so bad, Miller said. Travel continues to be one of the brightest spots in this recovering economy.
The total value of Expedia's bookings rose 14 percent in the quarter from a year ago to $5.75 billion. Revenue of $808.4 million exceeded forecasts for $801.3 million according to Thomson Reuters I/B/E/S.
Expedia was the first of the three publicly traded online travel agencies to report earnings for the latest quarter. Priceline and Orbitz Worldwide are the other two companies.
The travel industry has suffered from the economic downturn and online travel companies responded by slashing fees and offering promotions to bolster bookings.
Expedia is in a dispute with American Airlines over the airline's insistence that third-party carriers use its new direct connect technology for selling its flights.
American has stopped listing its fares on Orbitz, and Expedia later dropped American's tickets from its listings, charging that the airline's new strategy is anti-consumer and anti-choice.
American says direct connect lets shoppers assess travel costs based on more factors than just fares, but Orbitz and Expedia say direct connect makes it harder for travelers to compare various airline offerings.
Furthermore, they say the shift would disrupt the lucrative business model now favored by travel agencies who receive fare information through intermediaries called global distribution systems.
Priceline uses American's distribution technology to let customers access those fares.
Expedia Chief Executive Dara Khosrowshahi said on a conference call with analysts and reports that Expedia may see some short-term financial impact from the loss of American fares. But the companies are working toward an agreement, he said.
This is a bump in the road, and we hope that we can come to terms with American that will satisfy both sides, he said.
Expedia's stock fell 10.5 percent to $23.00 following the release of its earnings from their $25.69 close on Nasdaq.
(Reporting by Kyle Peterson; Editing by Tim Dobbyn and Richard Chang)