Booking Holdings (BKNG) Up 2.4% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Booking Holdings (BKNG). Shares have added about 2.4% 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 catalysts.

Booking Holdings Earnings & Revenues Lag Estimates in Q1

Booking Holdings delivered first-quarter 2018 non-GAAP earnings of $11.17 per share missing the Zacks Consensus Estimate by 9 cents. Further, the figure declined 6.9% from the year-ago quarter and 50.3% on a sequential basis.

Revenues of $2.837 billion lagged the Zacks Consensus Estimate of $2.931 billion. The figure also decreased 3% year over year and 11.7% from the previous quarter.

This decline in the reported results can primarily be attributed to change in Easter timing and adverse effects of foreign exchange fluctuations. Moreover, declining Agency revenues negatively impacted the top line.

Additionally, the company witnessed weak performance of rental car days and its airline tickets unit remained flat year over year.

The company witnessed strong growth in room nights booked number during the reported quarter, thanks to its robust properties portfolio. Moreover, its continued focus toward enhancing offerings of places to stay to customers is expected to continue aiding growth in the near term as well as the long haul. Moreover, the company’s branding initiatives, strengthening direct channel and growing usage of mobile by the travelers for their travel planning remain tailwinds.

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 21.3/68.7% in the first quarter (previous quarter’s split was 21.8/70.3%).

Merchant revenues came in $603 million, up 14.6% year over year. The company is still focused on ramping up of merchant business.

Further, Agency revenues were $1.95 billion, down 7.8% on a year-over-year basis.

Advertising & Other revenues were $285 million (10% of total revenues), declining 1.4% from the year-ago quarter. These are basically non-inter company revenues from Kayak and OpenTable. During the first quarter, the total room nights booked was 217 million, exhibiting year-over-year growth of 10.1%. This can be attributed to strong performance of the company’s direct channel, rising mobile share and growing alternative accommodation business.

Bookings

Booking Holdings’ overall bookings came in $25.4 billion were up 2% (8% in constant currency) from the year-ago quarter. This year-over-year growth based on constant currency was higher than management’s guided range. Merchant bookings were $5.7 billion, up 29.3% from the prior-year quarter. However, agency bookings decreased 4.4% from the year-ago level to $19.7 billion.

Operating Results

Adjusted EBITDA in the first quarter was $718 million, down 10% from the year-ago quarter.

Per the company, operating income was $556 million, declined 23.8% year over year. Moreover, operating margin of 19.6% contracted 530 bps from the year-ago quarter.

Balance Sheet

As of Mar 31, 2019, cash and short-term investments balance was $4.3 billion compared with $6.3 billion as of Dec 31, 2018. At the end of the first quarter, Booking Holdings had $7.6 billion of long-term debt.

During the reported quarter, the company generated $150 million of cash from operations, significantly down from $1.08 in the previous quarter. Further, the company generated free cash flow of $39 million during the first quarter.

Guidance

For the second quarter of 2019, Booking Holdings expects room nights booked to improve 6-8%. Further, total gross bookings are anticipated to reflect year-over-year growth within a range of 4-6% on a constant-currency basis. The company anticipates adjusted EBITDA in the range of $1.295 billion to $1.325 billion.

Pro-forma EPS is expected in the range of $22.15-$22.60.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

Currently, Booking Holdings has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. 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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