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Booking Holdings (BKNG) Beats on Q2 Earnings & Revenues

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Booking Holdings Inc. (BKNG - Free Report) reported better-than-expected results in the second quarter of 2018.

Non-GAAP net earnings of $20.67 per share beat the Zacks Consensus Estimate by $3.23. Earnings increased 36% year over year and 73% sequentially.

Revenues of $3.5 billion beat the Zacks Consensus Estimate of $3.44 billion. Also, revenues were up 20.8% sequentially and 16.9% from the prior-year quarter.

On a year-over-year basis, both the agency and merchant businesses showed strong momentum. Room nights, Rental cars and airline tickets, all performed impressively. On the call, management stated that the company will continue to focus on investments in people, systems and marketing, with a long-term outlook.

Despite strong results, its share price declined 5.02% in after-hours trading due to lower-than-expected guidance for the third quarter.

Overall, we remain positive about the secular growth trend in the online travel booking market, Booking Holdings’ strong position in the international markets, growth opportunities in the domestic market, good execution, prudent marketing strategy and strong financial position.

However, weaker average daily rates for accommodations (ADR), macro headwinds, increasing advertising spend and occupancy tax-related litigation remain overhangs. In a year’s time, the stock has surged 5%, underperforming the industry’s rally of 47.1%.

Let’s check out the numbers.

Revenues in Details

Booking Holdings generates bulk of its revenues from the international markets, wherein the agency model is more popular. This is reflected in the merchant/agency split of revenues, which was 20/73% in the second quarter (last reported quarter’s split was 18/73%).

Merchant revenues were up 34.8% sequentially and 42.5% year over year. Agency revenues increased 21.4% sequentially and 10% from the year-ago quarter.

Advertising & Other revenues were down 9.5% sequentially but up 34.5% from a year ago. These are basically non inter-company revenues from Kayak and OpenTable.

On a year-over-year basis, room nights volumes increased 12%. Also, rental car days increased 1% and airline tickets were up 5.3%.

Booking Holdings’ room night growth is attributable to geographically diverse inventory and brand recognition that tend to balance out macro uncertainties related to any one market, as well as growing competition from the local and international players.

Bookings

Booking Holdings’ overall bookings were up 14.9% (11% in constant currency) from the year-ago quarter and also ahead of management’s guided range.

Merchant bookings were up 68.7% from the prior-year quarter and agency bookings increased 6.4% from the year-ago level.

Operating Results

Adjusted EBITDA in the second quarter was $1.3 billion, up 35% from the year-ago quarter.

Booking Holdings’ operating income was up 36.7% year over year. Operating margin of 34.5% was up 500 basis points from the year-ago quarter.

Balance Sheet

Booking Holdings ended the quarter with cash and short-term investments balance of $7.3 billion compared with $6.9billion at the end of the first quarter.

During the second quarter, Booking Holdings generated $1.6 billion of cash from operations and free cash flow was $1.5 billion.

At the end of the quarter, Booking Holdings had $7.76 billion of long-term debt.

Guidance

For the third quarter of 2018, Booking Holdings expects room nights booked to grow 6-9% and total gross bookings to increase 3-6% year over year (5-8% on a constant-currency basis).

The company expects adjusted EBITDA in the range of $2,300-$2,360 million.

Pro-forma EPS is expected in the range of $36.70-$37.70. The Zacks Consensus Estimate is pegged at $40.27. GAAP EPS is expected within $35.85-$36.85.

Booking Holdings Inc. Price, Consensus and EPS Surprise

 

Booking Holdings Inc. Price, Consensus and EPS Surprise | Booking Holdings Inc. Quote

Zacks Rank and Stocks to Consider

Currently, Booking Holdings has a Zacks Rank #3 (Hold). Some better-ranked stocks in the same industry include Expedia Group, Inc. (EXPE - Free Report) , Infineon Technologies AG (IFNNY - Free Report) and Rambus Inc. (RMBS - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth for Expedia, Infineon Technologies and Rambus is currently projected to be 16.1%, 7.5% and 10%, respectively.

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