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Booking Holdings (BKNG) Q3 Earnings Miss, Revenues Beat

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Booking Holdings Inc. (BKNG - Free Report) reported third-quarter 2018 non-GAAP earnings of $37.78 per share, which increased 7.3% from the year-ago quarter and 82.8% on a sequential basis. However, the figure missed the Zacks Consensus Estimate of $38.37 per share slightly.

Revenues of $4.849 billion surpassed the Zacks Consensus Estimate of $4.822 billion. The figure also surged 9.4% sequentially and 37.1% from the prior-year quarter.

The strong performance of agency, merchant, advertising and other businesses of the company drove the top line. Further, the company witnessed robust growth in room nights which aided its gross booking during the reported quarter. This also contributed well to the revenue generation.

Although the company witnessed sluggish performance of rental car days, its airline tickets unit reflected year-over-year improvement which drove the results further.

We note that the stock has surged 6.3% in the after-hours trade which can primarily be attributed to strong outlook for the next quarter.

Moreover, the shares of Booking Holdings have returned 7.7% on a year-to-date basis, outperforming the industry’s rally of 1%.



Top-Line in Detail

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 21.6/73% in the third quarter (last reported quarter’s split was 20/73%).

Merchant revenues came in $1.049 billion, up 47.9% sequentially and 53.4% year over year. This was driven by the company’s continued efforts toward ramping up of merchant business.

Further, Agency revenues were $3.541 billion, increased 37.9% sequentially and 0.5% from the year-ago quarter.

Advertising & Other revenues were $258.5 million, down 0.9% sequentially but up 14.4% from on a year-over-year basis. These are basically non-inter company revenues from Kayak and OpenTable. Further, contributions from the buyout of Momondo aided year-over-year growth.

Further, Booking Holdings witnessed a solid momentum in room nights bookings. During the third quarter, the total room nights booked was 201.3 million which exhibited year-over-year growth of 13.4%. This was driven by strong performance of the company’s direct channel.

Bookings

Booking Holdings’ overall bookings came in $24.3 billion were up 11.5% (14% in constant currency) from the year-ago quarter. This year-over-year growth also comfortably surpassed management’s guided range.

Merchant bookings were up 65.7% from the prior-year quarter and agency bookings increased 2.3% from the year-ago level.

Booking Holdings Inc. Price, Consensus and EPS Surprise

 

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

Operating Results

Adjusted EBITDA in the third quarter was $2.4 billion, up 8% from the year-ago quarter.

Per the company, operating income was $2.2 billion, up 6.9% year over year. However, operating margin of 46.3% contracted 110 basis points (bps) from the year-ago quarter.

Balance Sheet

As of Sep 30, 2018, cash and short-term investments balance was $7.1 billion compared with $7.3 billion as of Jun 30, 2018.

At the end of the third quarter, Booking Holdings had $8.7 billion of long-term debt.

During the third quarter, Booking Holdings generated $2 billion of cash from operations compared to $1.6 billion in the second quarter.

Further, the company generated free cash flow of $1.8 billion during the reported quarter.

Guidance

For the fourth quarter of 2018, Booking Holdings expects room nights booked to grow 9-12% and total gross bookings to increase 6-9% year over year (10-13% on a constant-currency basis).

The company anticipates adjusted EBITDA in the range of $1.19 million to $1.22 million.

Pro-forma EPS is expected in the range of $18.90-$19.40. The Zacks Consensus Estimate is pegged at $18.82.

We believe secular growth trend in the online travel booking market along with the growing usage of mobile by the travelers for their travel planning are major positives.

Given this, the company’s strong position in the international markets, growth opportunities in the domestic market, solid momentum across the global accommodation space and proper execution of its marketing strategies will continue to drive its business growth in the near term as well as in the long haul.

Zacks Rank and Stocks to Consider

Booking Holdings carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Upland Software (UPLD - Free Report) , Adobe Systems (ADBE - Free Report) and Match Group (MTCH - Free Report) . While Upland Software sports a Zacks Rank #1 (Strong Buy), Adobe Systems and Match Group carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Upland Software, Adobe Systems and Match Group is currently pegged at 20%, 16.4% and 12.5%, respectively.

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