Priceline.com Incorporated (PCLN) Consumer Discretionary - Internet & Catalog Retail | Reports February 27, Before Market Opens

Key Takeaways

• The Estimize consensus is calling for earnings per share of $13.34 on $2.35 billion in revenue, nearly 30 cents higher than Wall Street on the bottom line and $20 million on the top
• Priceline’s sheer presence to international markets exposes financial performance to currency headwinds, future EU exits and other macroeconomic uncertainty
• Long term, Priceline’s investment in Ctrip provides it access to the hot travel market in China

Priceline prepares to announce fourth quarter results Monday afternoon with relatively tepid expectations compared to previous reports. Analyst at Estimize expect earnings to of $13.34 per share, roughly 6% higher than the same period last year. That estimate dropped by 2% in the past 3 months due to ongoing weakness from other travel companies like Expedia. Forecasts predict revenue will increase 17% to $2.35 billion, marking 4 consecutive quarters of double digit sales growth.

The stock continues to trudge higher despite concerns of a pullback in financial performance heading to the new fiscal year. In the past 3 months the stock increased by 8%, whereas Expedia declined by 5%. Historically the stock ticks up 1% immediately through the print and increases another 1% in the month following a report.

In the third quarter Priceline recorded gross travel bookings of $18.5 billion, reflecting a 25% increase from a year earlier. Gross profit made similar gains, increasing 22% to $3.6 billion with a significant portion coming from expanding international operations. Net income, on the other hand, suffered a 58% decline owing to nearly $1 billion impairment charge relating to OpenTable. In general, the company appears to be in good financial standing as it continues to grow into different travel channels.

As for Q4, Priceline expects to see similar growth across room nights booked, total gross bookings and profits on strong domestic and international travel volume. China remains a hot destination for travel companies to carve out a foothold as the economy shifts to a consumer driven one. The company’s investment in Chinese travel company Ctrip and the handful of acquisitions made in recent years will be an important source of revenue moving forward.

Another emerging trend originates in the alternative accommodations segment, popularly referred to as the sharing economy. Both Priceline and Expedia bolstered their presence in this sector to more effectively compete with Airbnb. There is still room to grow here, but if Airbnb gets any bigger it could spell trouble.

Priceline still faces pressure from ongoing currency headwinds and macroeconomic uncertainty especially throughout Europe and the United Kingdom. Any additional downturn in the Euro or Pound would be a difficult blow to weather for the company which generated two thirds of its revenue from the region. 

Photo Credit: Lenny K Photography