It has been about a month since the last earnings report for Booking Holdings (BKNG - Free Report) . Shares have added about 9.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Booking Holdings due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Booking Holdings Reports Q2 Loss
Booking Holdings reported second-quarter 2020 non-GAAP loss of $10.81 per share, which narrowed from the Zacks Consensus Estimate of $11.81 per share. Notably, the company reported earnings per share of $23.59 and $3.77 in the year-ago quarter and prior quarter, respectively.
Revenues of $630 million surpassed the Zacks Consensus Estimate of $517.6 million. However, it declined 84% on reported basis and 83% on constant currency basis. The figure was also down 72.5% from the prior quarter.
The coronavirus pandemic remained the biggest headwind during the second quarter. COVID-19 induced economic shutdowns, social distancing and shelter-in-place restrictions impacted the company’s business operations negatively.
Worsening travel trend and increasing cancellation rate of bookings were primaryfactors that hindered the company’s gross bookings. Notably, the booked room nights number, which was28 million during the reported quarter, plunged86.7% from the prior-year quarter.
Further, Booking Holdings witnessed year-over-year decline of 69.7% and 90.4% in the airline tickets unit and rental car days, respectively, in the second quarter.
Additionally, the company witnessed sluggish agency, merchant and, advertising and other businesses revenues during the reported quarter.
Booking Holdings anticipates this pandemic situation to persist as a major headwind to the global travel industry in the near term.
Nevertheless, the company’s highly variable cost structure and strong liquidity position are expected to help it in navigating through the crisis scenario.
Moreover, the company has started witnessing improvement in its bookings since April in a few countries where stay-at-home restriction has been relaxed.
Top Line in Detail
Booking Holdings generates bulk of revenues from the international markets, wherein the agency model is more popular. This is reflected in the merchant/agency split of revenues, which was 38.9/56.7% in the second quarter (previous quarter’s split was 28.8/62.2%).
Merchant revenues were $245 million, down 74.5% year over year. Further, Agency revenues were $357 million, reflecting a decline of86.3% on a year-over-year basis.
Advertising & Other revenues were $28 million (4.4% of total revenues), decreasing 90.1% from the year-ago quarter. These are basically non-inter company revenues from Kayak and OpenTable.
Booking Holdings’ overall gross bookings totalled $2.31 billion, down 90.8% year over year on reported basis. Further, the figure was down 91% at constant currency from the year-ago quarter.
Additionally, gross bookings lagged the Zacks Consensus Estimate of $3.24 billion.
Merchant bookings were $771 million, down 88% from the prior-year quarter. Further, agency bookings declined 91.8% year over year to $1.54 billion.
Adjusted EBITDA in the second quarter was ($376 million) against $1.4 billion in the prior-year quarter.
Per management, operating expenses were $1.1 billion, down 57.2% on a year-over-year basis.
Further, the company generated operating loss of $484 million against operating income of$1.25 billion in the prior-year quarter.
Balance Sheet & Cash Flow
As of Jun 30, 2020, cash and cash equivalents was $10.4 billion, up from $6.4 billion as of Mar 31, 2020.
At the end of the second quarter, Booking Holdings had $10.6 billion of long-term debt, down from $7.5 billion at the end of first quarter.
During the reported quarter, the company utilized $122 million of cash in operations against $380 million of cash generated from operations in the prior quarter.
Further, free cash flow was $52 million in the second quarter.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 44.95% due to these changes.
Currently, Booking Holdings has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Booking Holdings has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.