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Booking Holdings (BKNG) Ticks Up Ahead of Earnings: What to Expect

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Shares of Booking Holdings (BKNG - Free Report) gained as much as 1.5% during regular hours Tuesday, a day before the online travel giant releases its latest quarterly earnings report. Investors may be more familiar with Booking’s old brand name, Priceline, which it changed in February.

Booking shares have gained 2.2% in the last year, but are up 20.5% on a year-to-date basis. The company has seen solid momentum on the back of strong performance in its room nights and rental car segments. Still, weaker airline ticket performance, macroeconomic headwinds, and increased advertising headwinds represent a few of investors’ current concerns.

In recent news, Booking expanded its partnership with Chinese firm Ctrip.com International (CTRP - Free Report) in mid-June. Through the arrangement, Booking’s restaurant reservation service, OpenTable, will see its North American restaurants become available to Ctrip users for booking.

A solid earnings report could potentially help BKNG move back toward the $2,170 mark that it hit in March. Tuesday’s price movement reflects investor optimism heading into Wednesday’s report, but what should we expect from its soon-to-be-reported quarter? Let’s take a closer look.

Earnings Outlook

Booking will release its Q2 fiscal 2018 results after the market closes on Wednesday. Here’s what analysts are expecting, according to our Zacks Consensus Estimates:

Earnings: BKNG is projected to report earnings of $17.41 per share, which would represent 15% growth from the year-ago period.

Estimate Revisions: BKNG has seen downward earnings estimate revisions in the past 30 days for the current quarter and next quarter. However, the firm has also seen mixed recent estimate activity for the current fiscal year and next fiscal year.

Revenue: Consensus estimates have BKNG’s Q2 revenue pegged at $3.44 billion. This would mark growth of 13.7% year-over-year.

Valuation

BKNG is trading at 21.5x forward 12-month earnings heading into today’s report. This represents a premium compared to the broader “Consumer Discretionary” market’s average of about 18.6x, but is still comparatively “cheaper” than the stock has been over the last year.

In the past year, BKNG has traded as high as 24.9x and as low as 19.3x. Its 52-week median earnings multiple is 22.1x.

Bottom Line

Booking shares took a large hit in November after issuing disappointing guidance, but has since recovered those losses this year. The company continues to make strategic partnerships and investments to expand its market share. While there are still challenges ahead, Booking appears to be on the right track.

Investors should keep an eye on Q3 guidance figures, as summer is the period with the highest travel-related activity.

BKNG shares have performed well in 2018, so many investors may be more interested in realizing their gains rather than risking an earnings play. Analyst revision activity for the quarter has been mixed, but BKNG has a Zacks Earnings ESP (Expected Surprise Prediction) of 0.87%.

A positive Earnings ESP paired with a Zacks Rank #3 (Hold) or better ranking helps us feel confident about the potential for an earnings beat. In fact, our 10-year backtest has revealed that this methodology has accurately produced a positive surprise 70% of the time.

Given the stock’s current Zacks Rank of #3 (Hold), this Earnings ESP value leaves us optimistic about BKNG’s chances at beating estimates going into Wednesday afternoon’s report. It is also worth noting that the Booking has not missed earnings estimates in over seven years.

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