It has been about a month since the last earnings report for The Priceline Group Inc. . Shares have added about 3.7% in the past month, outperforming the market.
Will the recent positive trend continue leading up to the stock’s next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Priceline's Q4 Earnings Beat Estimates, Stock Rises
Priceline posted better-than-expected fourth-quarter 2016 results, beating the Zacks Consensus Estimate on both counts.
Non-GAAP earnings per share of $14.21 beat the Zacks Consensus Estimate by 8.8% and were better than management’s guidance of $12.5 at the mid-point.
Investors cheered the performance and for once rewarded management for the tradition of guiding conservatively. This was reflected in the 3.31% appreciation in the stock price in afterhours trading.
Year-over-year, the agency business showed strong momentum but merchant business was a little lumpy. Room nights grew much faster than in the recent past. Rental cars also performed impressively. The only point of weakness was airline tickets.
Revenues
Priceline reported revenues of $2.35 billion, down 36.4% sequentially but up 17.4% from the year-ago quarter. Revenues beat the Zacks Consensus Estimate by a slight margin.
Revenues by Channel
Priceline generates the bulk of its revenues from international markets where the agency model is more popular. This is reflected in the merchant/agency split of revenues, which was 19/74% in the third quarter (previous quarter split was (17/78%).
Merchant revenues were down 41% sequentially and 1.4% year over year. Agency revenues decreased 66.6% sequentially but increased 24% year over year.
Advertising & Other revenue was down 3.4% sequentially but up 12% from last year. This is basically non inter-company revenues from Kayak and OpenTable. The restaurant reservation service that Priceline acquired some time back is rapidly building on the number of restaurants in North America and also expanding internationally.
Room nights, rental car days and airline ticket volumes were down a respective 15.3%, 28.6% and 18.8% sequentially. On a year-over-year basis, room nights were up 31%, rental car days increased 14.4% while airline ticket volumes were down 4.3%. Priceline’s room night growth is attributable to its geographically diverse inventory and brand recognition that tends to balance out macro uncertainties related to any one market, as well as growing competition from local and international players. The company did however see average daily rates for accommodations or ADRs declining. Rentalcars.com also did quite well but there was some softness in ticket volumes.
Bookings
Priceline’s overall bookings were down 22.2% sequentially but up 25.8% (28% in constant currency) year over year, better than guided.
Merchant bookings were down 26.7% sequentially but up 27.8% year over year. Agency bookings decreased 21.4% sequentially but increased 25.5% from the year-ago levels.
Margins and Net Income
Priceline reported pro forma gross margin of 96.9%, down 32 basis points (bps) sequentially but up 296 bps year over year.
Owing to the nature of its business and the mix of agency versus merchant revenues, management usually uses gross profit dollars rather than margin to gauge performance during any quarter. Priceline’s gross profit dollars were down 57.7% sequentially but up 21% (24% in constant currency) from last year, higher than the guidance. International gross profit grew 23% (26% on a constant currency basis). U.S. gross profit grew 9% from last year.
Priceline’s adjusted operating income was down more than 100% sequentially but grew 18.8% from $700.7 million reported last year. Operating margin of 35.4% declined 1377 bps sequentially but was up 40 bps from the year-ago quarter.
Priceline’s GAAP net income was $673.9 million or $13.47 a share, compared with $506 million, or $10.13 a share in the September quarter and $504.3 million, or $10 a share in the year-ago quarter.
Balance Sheet
Priceline ended the quarter with cash and short term investments balance of $4.3 billion, up $783.6 million during the quarter. Priceline generated $1.1 billion of cash from operations. It spent around $518 million on capex and $256 million on share repurchases.
At quarter-end, Priceline had $6.17 billion in long-term debt with the net debt position being $4.09 billion, compared with a net debt position of $3.92 billion in the previous quarter.
Guidance
For the first quarter of 2017, Priceline expects room nights booked to grow 20-25% and total gross bookings to grow 17-22% year over year (19-24% on a constant currency basis).
Priceline expects gross profit dollars to increase 9.5-14.5% (11-16% on a constant currency basis), with adjusted EBITDA in a range of $550-580 billion.
Pro forma earnings per share (EPS) are expected to come in a range of $8.25-$8.65. The Zacks Consensus Estimate is pegged at $10.72. GAAP EPS is expected in a range of $7.5-$7.9.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been six downward revisions for the current quarter. In the past month, the consensus estimate also shifted downward by 18.5% due to these changes.
VGM Scores
At this time, Priceline's stock has a nice Growth Score of 'B', though it is lagging a lot on the momentum front with a 'D'. Following the exact same course, the stock was allocated also a grade of 'D' on the value side, putting it in the bottom 40% 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.
The company's stock is suitable solely for growth based on our styles scores.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of these revisions also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
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Why Is Priceline (PCLN) Up 3.7% Since the Last Earnings Report?
It has been about a month since the last earnings report for The Priceline Group Inc. . Shares have added about 3.7% in the past month, outperforming the market.
Will the recent positive trend continue leading up to the stock’s next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Priceline posted better-than-expected fourth-quarter 2016 results, beating the Zacks Consensus Estimate on both counts.
Investors cheered the performance and for once rewarded management for the tradition of guiding conservatively. This was reflected in the 3.31% appreciation in the stock price in afterhours trading.
Revenues
Priceline reported revenues of $2.35 billion, down 36.4% sequentially but up 17.4% from the year-ago quarter. Revenues beat the Zacks Consensus Estimate by a slight margin.
Revenues by Channel
Priceline generates the bulk of its revenues from international markets where the agency model is more popular. This is reflected in the merchant/agency split of revenues, which was 19/74% in the third quarter (previous quarter split was (17/78%).
Advertising & Other revenue was down 3.4% sequentially but up 12% from last year. This is basically non inter-company revenues from Kayak and OpenTable. The restaurant reservation service that Priceline acquired some time back is rapidly building on the number of restaurants in North America and also expanding internationally.
Room nights, rental car days and airline ticket volumes were down a respective 15.3%, 28.6% and 18.8% sequentially. On a year-over-year basis, room nights were up 31%, rental car days increased 14.4% while airline ticket volumes were down 4.3%. Priceline’s room night growth is attributable to its geographically diverse inventory and brand recognition that tends to balance out macro uncertainties related to any one market, as well as growing competition from local and international players. The company did however see average daily rates for accommodations or ADRs declining. Rentalcars.com also did quite well but there was some softness in ticket volumes.
Bookings
Priceline’s overall bookings were down 22.2% sequentially but up 25.8% (28% in constant currency) year over year, better than guided.
Merchant bookings were down 26.7% sequentially but up 27.8% year over year. Agency bookings decreased 21.4% sequentially but increased 25.5% from the year-ago levels.
Margins and Net Income
Priceline reported pro forma gross margin of 96.9%, down 32 basis points (bps) sequentially but up 296 bps year over year.
Owing to the nature of its business and the mix of agency versus merchant revenues, management usually uses gross profit dollars rather than margin to gauge performance during any quarter. Priceline’s gross profit dollars were down 57.7% sequentially but up 21% (24% in constant currency) from last year, higher than the guidance. International gross profit grew 23% (26% on a constant currency basis). U.S. gross profit grew 9% from last year.
Priceline’s adjusted operating income was down more than 100% sequentially but grew 18.8% from $700.7 million reported last year. Operating margin of 35.4% declined 1377 bps sequentially but was up 40 bps from the year-ago quarter.
Priceline’s GAAP net income was $673.9 million or $13.47 a share, compared with $506 million, or $10.13 a share in the September quarter and $504.3 million, or $10 a share in the year-ago quarter.
Balance Sheet
Priceline ended the quarter with cash and short term investments balance of $4.3 billion, up $783.6 million during the quarter. Priceline generated $1.1 billion of cash from operations. It spent around $518 million on capex and $256 million on share repurchases.
At quarter-end, Priceline had $6.17 billion in long-term debt with the net debt position being $4.09 billion, compared with a net debt position of $3.92 billion in the previous quarter.
Guidance
For the first quarter of 2017, Priceline expects room nights booked to grow 20-25% and total gross bookings to grow 17-22% year over year (19-24% on a constant currency basis).
Priceline expects gross profit dollars to increase 9.5-14.5% (11-16% on a constant currency basis), with adjusted EBITDA in a range of $550-580 billion.
Pro forma earnings per share (EPS) are expected to come in a range of $8.25-$8.65. The Zacks Consensus Estimate is pegged at $10.72. GAAP EPS is expected in a range of $7.5-$7.9.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been six downward revisions for the current quarter. In the past month, the consensus estimate also shifted downward by 18.5% due to these changes.
The Priceline Group Inc. Price and Consensus
The Priceline Group Inc. Price and Consensus | The Priceline Group Inc. Quote
VGM Scores
At this time, Priceline's stock has a nice Growth Score of 'B', though it is lagging a lot on the momentum front with a 'D'. Following the exact same course, the stock was allocated also a grade of 'D' on the value side, putting it in the bottom 40% 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.
The company's stock is suitable solely for growth based on our styles scores.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of these revisions also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.