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Booking Holdings (BKNG) Up 2.8% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Booking Holdings (BKNG - Free Report) . Shares have added about 2.8% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Booking Holdings due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Booking Holdings Earnings & Revenues Top Estimates in Q2

Booking Holdings delivered second-quarter 2019 non-GAAP earnings of $23.59 per share beating the Zacks Consensus Estimate by 79 cents. Further, the figure improved 14.1% from the year-ago quarter and 111.2% on a sequential basis.

Revenues of $3.85 billion outpaced the Zacks Consensus Estimate of $3.76 billion. The figure increased 9% year over year and 35.7% from the previous quarter.

Strong performance of the company’s merchant, and advertising and other businesses drove the top line year over year. Additionally, robust accommodation business aided acceleration in the booked room nights number, which came in at 213 million during the reported quarter, up 12% from the prior-year quarter.

Further, the company witnessed year-over-year improvement in rental car days and airline tickets unit, which in turn contributed to the results.

Secular growth trend in the online travel booking market and growing usage of mobile by the travelers for their travel planning remain 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, merchandising and customer acquisition program are likely to benefit the company in near term.

Top-Line in Detail

Booking Holdings generates bulk of revenues from the international markets, wherein the agency model is more popular. This is reflected in the merchant/agency split of revenues, which was 24.9/67.7% in the second quarter (previous quarter’s split was 21.3/68.7%).

Merchant revenues came in $959 million, up 35.1% year over year. The company’s continued efforts toward ramping up of merchant business remains a positive. Growing merchandising initiatives and expanding global footprint of the company’s payment platform drove year-over-year growth.

Further, Agency revenues were $2.61 billion, up 1.6% on a year-over-year basis.

Advertising & Other revenues were $284 million (7.4% of total revenues), improving 9.2% from the year-ago quarter. These are basically non-inter company revenues from Kayak and OpenTable.

Bookings

Booking Holdings’ overall bookings came in $25.04 billion were up 4.8% (10% in constant currency) from the year-ago quarter. This year-over-year growth exceeded management’s guided range.

Merchant bookings were $6.4 billion up 33.2% from the prior-year quarter. However, agency bookings declined 2.4% year over year to $18.64 billion.

Operating Results

Adjusted EBITDA in the second quarter was $1.4 billion, up 15% from the year-ago quarter.

Per management, operating expenses as a percentage of revenues expanded 220 bps to 67.6%.

Operating income was $1.25 billion, increasing2.1% year over year. Moreover, operating margin of 32.4% contracted 210 bps from the year-ago quarter.

Balance Sheet

As of Jun 30, 2019, cash and short-term investments balance was $6.8 billion compared with $4.3 billion as of Mar 31, 2019.

At the end of the second quarter, Booking Holdings had $7.7 billion of long-term debt.

During the reported quarter, the company generated $1.8 billion of cash from operations, significantly down from $150 million in the previous quarter.

Further, Booking Holdings repurchased shares worth $2.6 billion during the reported quarter.

Guidance

For the third 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 3-5% on a constant-currency basis.

The company anticipates adjusted EBITDA in the range of $2.40-$2.45 billion.

Non-GAAP earnings are expected in the range of $43.60-$44.60 per share.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month.

VGM Scores

Currently, Booking Holdings has a strong Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Booking Holdings has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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