Amadeus IT Earnings: Modest Demand Recovery Continued in the First Half of the Year, Led by Asia

Narrow-moat Amadeus IT AMS shares traveled 4% lower, as we think demand recovery in the first half may have disappointed some investors. Amadeus shares still trade slightly above our EUR 60 fair value estimate even after the modest pullback.

First-half bookings were up 17% to 76.5% of 2019′s level, with second-quarter bookings relative to prepandemic marks up 3.4 points versus the first quarter. Overall, this is tracking with our full-year estimate of 78% of 2019′s level, especially given management’s commentary that July has shown improvement (unquantified). Still, booking volumes in the key markets of North America (29% of first-half bookings) and Western Europe (28%) have remained slightly above and at around two thirds of 2019′s levels, respectively, during the past year. While disappointing, we think gradual improvement remains ahead, as business trips on full carriers start to recover relative to low-cost carrier leisure traffic, which should help global distribution system platforms like Amadeus. Encouragingly, Asia-Pacific bookings (17% of total) jumped 89%, reaching 74% of 2019′s level. Also, and total company revenue per booking was up 12% to EUR 5.78, tracking above our 4% growth and EUR 5.65 forecast for 2023, driven by an international mix increase.

Elsewhere, passenger boardings were up 37% to 904 million, reaching 95% of 2019′s level, trending toward our 97% 2023 estimate, with revenue per passenger boarding of EUR 0.97 near our EUR 0.98 for the full year. Also, hospitality sales were up 24%, arriving at 48% of our full-year estimate. Meanwhile, leveraging of personal and other costs drove EBITDA up 43% to 49% of our full-year prognosis, amounting to a margin of 38.9% versus 35.3% last year and compared with our 39.6% estimate for 2023.

Finally, Standard & Poor’s upgraded Amadeus’ credit rating to BBB, leading the company to approve a EUR 333.4 million dividend in June (fully paid in July), representing a payout of 50% of 2022′s total profit.