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Booking Holdings (BKNG) Q4 Earnings & Revenues Top Estimates

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Booking Holdings Inc. BKNG reported fourth-quarter 2019 non-GAAP earnings of $23.30 per share, which beat the Zacks Consensus Estimate by 5.4% and improved 4% from the year-ago quarter. However, the bottom line declined 48.6% on a sequential basis.

Revenues of $3.34 billion surpassed the Zacks Consensus Estimate by 1.6% and improved 4% year over year. However, the top line was down 33.8% from the previous quarter.

Solid momentum across merchant, and advertising and other businesses drove the top line year over year. Additionally, robust accommodation business drove the booked room nights number, which came in at 191 million during the reported quarter, up 11.8% from the prior-year quarter.

Further, Booking Holdings witnessed robust improvement in airline tickets unit and rental car days that rose 11.3% and 11.9%, respectively, from the year-ago quarter.

However, continued softness in agency business remained a headwind during the reported quarter.

Coming to price performance, Booking Holdings has declined 1.1% over a year against the industry’s rally of 10.1%.



Further, the coronavirus outbreak is acting as a headwind. Notably, APAC region accounts for significant portion of the company’s total room booked nights but the outbreak is not only disrupting travel plans of people living in China but also Asia at large.

Moreover, the company has already started witnessing increasing cancellations and decreasing bookings in the APAC region, which is a major negative. Consequently, management expects decline in bookings and room nights number in the first quarter.

Following the weak first-quarter guidance, shares of the company have plunged 2.7% in the pre-market trading.

Nevertheless, secular growth trend in the online travel booking market and growing usage of mobile by 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 alternative accommodation business and expanding payment platform are likely to instill investor confidence in the stock.

Further, integration with Rentalcars.com has started benefiting the company. Additionally, strengthening flight capabilities remains a major positive.

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 28.6/63.7% in the fourth quarter (previous quarter’s split was 26.1/68.1%).

Merchant revenues came in $955 million, up 36.2% year over year. The company’s continued efforts toward improving of merchant business remained a positive.

Further, Agency revenues were $2.1 billion, down 5.9% on a year-over-year basis.

Advertising & Other revenues were $258 million (7.7% of total revenues), improving 2% from the year-ago quarter. These are basically non-inter company revenues from Kayak and OpenTable.

Bookings

Booking Holdings’ overall gross bookings came in $20.7 billion, up 5.9% year over year. Further, the figure was up 7% at constant currency from the year-ago quarter. We note that gross bookings growth rate exceeded management’s guided range.

Additionally, gross bookings surpassed the Zacks Consensus Estimate of $20.1 billion.

Merchant bookings were $6.5 billion, up 50.3% from the prior-year quarter. However, agency bookings declined 6.6% year over year to $14.2 billion.

Booking Holdings Inc. Price, Consensus and EPS Surprise

Booking Holdings Inc. Price, Consensus and EPS Surprise

Booking Holdings Inc. price-consensus-eps-surprise-chart | Booking Holdings Inc. Quote

Operating Results

Adjusted EBITDA in the fourth quarter was $1.3 billion, up 2% from the year-ago quarter. As a percentage of revenues, the figure contracted 70 basis points (bps) to 38.4%.

Per management, operating expenses were $2.2 billion, up 4.7% year over year. Further, as a percentage of revenues, the figure expanded 50 bps from the year-ago quarter to 64.9%.

Operating income was $1.2 billion, increasing 2.5% year over year. However, operating margin of 35.1% contracted 50 bps from the year-ago quarter.

Balance Sheet & Cash Flow

As of Dec 31, 2019, cash and short-term investments balance was $7.3 billion, down from $7.4 billion as of Sep 30, 2019.

At the end of the fourth quarter, Booking Holdings had $7.6 billion of long-term debt, up from $7.5 billion in the previous quarter.

During the reported quarter, the company generated $1.1 billion of cash from operations, decreasing from $1.9 billion in the prior quarter.

Further, free cash flow was $990 million in the fourth quarter. The company repurchased shares worth $1.3 billion during the reported quarter.

Guidance

For first-quarter 2020, Booking Holdings expects room nights booked to be down by 5-10%.

Further, total gross bookings are anticipated to reflect year-over-year decline in the range of 10-15%. On a constant-currency basis, gross bookings are expected in the range of 8-13%.

The company anticipates adjusted EBITDA in the range of $560-$590 million.

Non-GAAP earnings are expected in the range of $9.05-$9.65 per share. The Zacks Consensus Estimate for earnings is pegged at $11.81 per share.

Further, the company anticipates year-over-year decline in revenues in the range of 3-7% and 5-9% on GAAP and non-GAAP basis, respectively.

The Zacks Consensus Estimate for revenues is projected at $2.99 billion.

Zacks Rank & Key Picks

Booking Holdings currently has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the retail-wholesale sector are Stamps.com STMP, eBay EBAY and Fiverr International (FVRR - Free Report) . While Stamps.com and eBay sport a Zacks Rank #1 (Strong Buy), Fiverr carries 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 Stamps.com, eBay and Fiverr is currently pegged at 15%, 11.25% and 44.18%, respectively.

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