Booking Holdings (BKNG) Up 20.2% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Booking Holdings (BKNG). Shares have added about 20.2% 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' Q3 Earnings Miss, Revenues Beat
Booking Holdings reported third-quarter 2020 non-GAAP earnings of $12.27 per share, which missed the Zacks Consensus Estimate by 23.2%. Further, the figure plunged 73% year over year.
Nevertheless, the bottom line reversed the loss of $10.81 per share reported in the previous quarter.
Revenues of $2.64 billion surpassed the Zacks Consensus Estimate of $2.61 billion. The top line also surged significantly from $630 million in the prior quarter.
However, the metric declined 48% on reported basis and 49% on constant currency basis from the year-ago quarter.
The coronavirus pandemic remained the biggest headwind during the third quarter. COVID-19-induced disruptions in the global travel industrynegatively impacted the company’s results.
Booking Holdings witnessed a year-over-year decline of 55.6% and 9.3% in the rental car days and airline tickets unit, respectively, in the third quarter.
Additionally, the company witnessed sluggish agency, merchant, and advertising and other business revenues during the reported quarter.
Moreover, softness in the travel trends in Asia and especially, all over Europe were a major concern.
Nevertheless, the company witnessed improvement in the North American region during the reported quarter.
Notably, the booked room nights number, which was 127 million in the third quarter, plunged 43.1% from the prior-year quarter but improved significantly from 28 million in the last reported quarter.
Booking Holdings anticipates this pandemic situation to persist as a major headwind to the travel industry in the near term.
Nevertheless, the company’s highly variable cost structure and strong liquidity position are expected to help it navigate the crisis scenario. Moreover, its solid cost-cutting initiatives are an added positive.
TopLine 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 31.7/65.3% in the third quarter (previous quarter’s split was 38.9/56.7%)
Merchant revenues were $837 million, down 36.2% year over year.Further, Agency revenues were $1.7 billion, down 49.8% on a year-over-year basis.
Advertising & Other revenues were $80 million (3% of total revenues), decreasing 72.6% from the year-ago quarter. These are basically non-inter company revenues from Kayak and OpenTable.
Bookings
Booking Holdings’ overall gross bookings totalled $13.4 billion, down 47.1% year over year on reported basis. Further, the figure was down 48% inconstant currency from the year-ago quarter.
Additionally, gross bookings lagged the Zacks Consensus Estimate of $13.5 billion.
Merchant bookings were $3.9 billion, down 46.1% from the prior-year quarter. Further, agency bookings plunged47.4% year over year to $9.5 billion.
Operating Results
Adjusted EBITDA in the third quarter was $1 billion, slumping 60% from the prior-year quarter.
Per management, operating expenses were $2.3 billion, down 12.9% on a year-over-year basis. As a percentage of revenues, the same expanded significantly to 88.1% in the reported quarter from 52.9% in the previous quarter.
Further, the company generated operating income of $315 million,which plummeted 86.7% year over year.
Balance Sheet & Cash Flow
As of Sep 30, 2020, cash and cash equivalents was $11.2 billion, up from $10.4 billion as of Jun 30, 2020.
At the end of the third quarter, Booking Holdings had $10.8 billion of long-term debt, up from $10.6 billion at the end of the second quarter.
During the reported quarter, the company generated $920 million worth cash from operations compared with$122 million of cash utilized in operations duringthe prior quarter.
Further, free cash flow was $848 million in the third quarter.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -125% due to these changes.
VGM Scores
At this time, Booking Holdings has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Charting a somewhat similar path, 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 downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Booking Holdings has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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