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Booking Holdings (BKNG) Q4 Earnings & Revenues Beat Estimates

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Booking Holdings Inc. (BKNG - Free Report) delivered fourth-quarter 2018 non-GAAP earnings of $22.49 per share beating the Zacks Consensus Estimate by $3.1. Further, the figure surged 33.4% from the year-ago quarter but declined 40.5% on a sequential basis.

Revenues of $3.213 billion surpassed the Zacks Consensus Estimate of $3.211 billion. The figure also surged 16% from the prior-year quarter but decreased 33.7% sequentially.

The strong performance of agency, merchant, advertising and other businesses of the company drove year-over-year top-line growth. Additionally, accelerating room nights number, which drove the company’s gross booking, aided the results.

Although the company witnessed sluggish performance of rental car days, its airline tickets unit reflected year-over-year improvement. This benefited the reported quarter.

However, we note that the stock has plunged 9.1% in the after-hours trade on Feb 27. This can be attributed to weaker-than-expected first-quarter 2019 earnings outlook.

Nevertheless, secular growth trend in the online travel booking market and growing usage of mobile by the travelers for their travel planning are tailwinds.

Moreover, 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 business growth in the near term as well as in the long haul.

Increasing investments in an attempt to strengthen its alternative accommodation business, payment platform, and branding and customer acquisition program are likely to benefit the company further.

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 21.8/70.3% in the fourth quarter (last reported quarter’s split was 21.6/73%).

Merchant revenues came in $701 million, up 37.7% year over year but down 33.2% sequentially. The company’s continued efforts toward ramping up of merchant business and its payment platform which continues to enhance its merchant offerings drove year-over-year growth.

Further, Agency revenues were $2.259 billion, increased 9% on a year-over-year basis but decreased 36.2% from the previous quarter.

Advertising & Other revenues were $253 million, down 2.1% sequentially but up 14.5% from the year-ago quarter. These are basically non-inter company revenues from Kayak and OpenTable.

Further, Booking Holdings witnessed solid momentum in room nights bookings. During the fourth quarter, the total room nights booked was 171 million, exhibiting year-over-year growth of 13%. This can be attributed to strong performance of the company’s direct channel, mobile platform and alternative accommodation business.

Bookings

Booking Holdings’ overall bookings came in $19.6 billion were up 8.7% (13% in constant currency) from the year-ago quarter. This year-over-year growth came within management’s guided range.

Merchant bookings were up 45.8% from the prior-year quarter and agency bookings increased 1.4% from the year-ago level.

Operating Results

Adjusted EBITDA in the fourth quarter was $1.26 billion, up 17.4% from the year-ago quarter.

Per the company, operating income was $1.14 billion, up 15.9% year over year. Moreover, operating margin of 35.6% expanded 40 basis points (bps) from the year-ago quarter.

Balance Sheet

As of Dec 31, 2018, cash and short-term investments balance was $6.3 billion compared with $7.1 billion as of Sep 30, 2018.

At the end of the fourth quarter, Booking Holdings had $8.6 billion of long-term debt.

During the fourth quarter, the company generated $1.08 billion of cash from operations compared with $2 billion in the third quarter.

Further, the company generated free cash flow of $997 million during the reported quarter.

Guidance

For the first quarter of 2019, Booking Holdings expects room nights booked to grow 6-8%. Further, total gross bookings are anticipated to reflect year-over-year growth within a range of 5-7% on a constant-currency basis.

The company anticipates adjusted EBITDA in the range of $680 million to $700 million.

Pro-forma EPS is expected in the range of $10.90-$11.20. The Zacks Consensus Estimate is pegged at $12.99.

Zacks Rank and Stocks to Consider

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

Some better-ranked stocks in the broader technology sector are eGain Corporation (EGAN - Free Report) , Alteryx, Inc. (AYX - Free Report) and Agilent Technologies, Inc. (A - Free Report) . While eGain sports a Zacks Rank #1 (Strong Buy), Alteryx and Agilent Technologies 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 eGain, Alteryx and Agilent Technologies is currently pegged at 30%, 8% and 11.75%, respectively.

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