Sabre (NASDAQ: SABR) lost less money than expected in the fourth quarter, but its outlook raised significant questions about future growth. Shares of the travel software company, which reported its Q4 earnings results Thursday, traded down 27% as of 12:30 p.m. ET as investors seemingly can find little reason to get excited about the stock.
Holding steady but going nowhere?
Sabre is one of three major global travel distribution systems, networks that connect travel agencies and users to a vast array of flights, hotels, and rental car options. It is a business that has been somewhat sidestepped by internet options but remains important to large agencies and corporate travel services.
Sabre lost $0.12 per share in the fourth quarter, ahead of the consensus $0.14-per-share loss estimate, on revenue that at $687 million was about $4 million below what was expected. Free cash flow for the quarter was $77 million, much better than the $22 million reported in the fourth quarter of 2022.
For the year, Sabre grew sales by 15% to $2.9 billion thanks to an increase in global air, hotel, and other travel bookings.
CEO Kurt Ekert called 2023 "an important year for Sabre," noting "significant commercial successes, efficiency gains, and product innovation achievements that drove strong financial results." But 2024 looks to be about flat compared to 2023, with Sabre forecasting about $3 billion in revenue.
Is Sabre a buy after its stock fall?
Prior to the pandemic, Sabre was nearing about $1 billion in sales per quarter. It is hard to see a clear path back to those levels.
In 2021, Sabre lost a significant chunk of its business when Expedia Group moved to simplify its operations. Sabre at the time described that business as lower margin, but it has not been easy to backfill that revenue hole. There is some reason to hope that business travel could perform better than Sabre expects, providing a boost, but that remains to be seen.
The company has more than $4.3 billion in net debt. It shouldn't run into trouble servicing that debt at least in the near term, but the combination of anemic growth in 2024 and questions about the future of the industry leaves little reason for investors to get excited even at these lower levels.
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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
