Booking Holdings Inc. (BKNG - Free Report) reported first-quarter 2020 non-GAAP earnings of $3.77 per share, which missed the Zacks Consensus Estimate by 25.9%. Further, it declined 66.2% and 83.8% year over year and sequentially, respectively.
Revenues of $2.29 billion surpassed the Zacks Consensus Estimate by 3.9%. However, it decreased 19% on reported basis and 17% on constant currency basis. Further, the top line was down 31.5% from the prior quarter.
Coronavirus (COVID-19) pandemic remained the biggest headwind for the company during the first quarter. COVID-19 induced economic shutdowns impacted the company’s business operations significantly.
Cancellation rate of bookings surged significantly since mid-March owing to COVID-19 led social distancing worldwide.
Both agency and, advertising and other businesses exhibited weak performance during the reported quarter.
Further, the booked room nights number, which came in at 124 million during the reported quarter, declined 42.8% from the prior-year quarter.
Furthermore, Booking Holdings witnessed year-over-year decline of 8% and 36.4% in the airline tickets unit and rental car days, respectively, in the first quarter.
Nevertheless, growth in merchant business remained a tailwind during the reported quarter.
Booking Holdings anticipates this pandemic situation to persist as a major headwind to the global travel industry in the near term.
Coming to price performance, Booking Holdings has lost 29.7% on a year-to-date basis against the industry’s rally of 14.1%.
Nevertheless, the company remains optimistic about its highly variable cost structure and strong liquidity position, which are expected to help it in navigating through the crisis scenario.
Moreover, the company has started witnessing improvement in its domestic bookings since April in a few countries where stay-at-home restriction has been relaxed.
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 28.8/62.2% in the first quarter (previous quarter’s split was 28.6/63.7%).
Merchant revenues came in $659 million, up 9.3% year over year. The company’s continued efforts toward improving of merchant business remained a positive.
Further, Agency revenues were $1.4 billion, down 26.9% on a year-over-year basis.
Advertising & Other revenues were $205 million (9% of total revenues), decreasing 28.1% from the year-ago quarter. These are basically non-inter company revenues from Kayak and OpenTable.
Booking Holdings’ overall gross bookings came in $12.4 billion, down 51.2% year over year on reported basis. Further, the figure was down 50% at constant currency from the year-ago quarter.
Additionally, gross bookings lagged the Zacks Consensus Estimate of $19.5 billion.
Merchant bookings were $4.1 billion, down 28.9% from the prior-year quarter. Further, agency bookings declined 57.7% year over year to $8.3 billion.
Adjusted EBITDA in the first quarter was $290 million, plunging 59.6% from the year-ago quarter. As a percentage of revenues, the figure contracted to 12.7% from 24.9% in the year-ago quarter.
Per management, operating expenses were $2.6 billion, up 13.8% on a year-over-year basis.
Consequently, the company generated operating loss of $309 million compared with $556 million of operating income in the prior-year quarter.
Balance Sheet & Cash Flow
As of Mar 31, 2020, cash and short-term investments balance was $7.2 billion, down from $7.3 billion as of Dec 31, 2019.
At the end of the first quarter, Booking Holdings had $7.5 billion of long-term debt, down from $7.6 billion in the previous quarter.
During the reported quarter, the company utilised $380 million of cash in operations against $1.1 billion of cash generated from operations in the prior quarter.
Further, free cash flow was ($460) million in the first quarter.
Zacks Rank & Key Picks
Booking Holdings currently has a Zacks Rank #5 (Strong Sell).
Some better-ranked stocks in the retail-wholesale sector are Wayfair Inc. (W - Free Report) , Alibaba Group Holding Limited (BABA - Free Report) and eBay Inc. (EBAY - Free Report) . While Wayfair sports a Zacks Rank #1 (Strong Buy), Alibaba and eBay 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 Wayfair, Alibaba and eBay is currently pegged at 23.04%, 24.6% and 12.41%, respectively.
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