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Booking Holdings (BKNG) Down 10.9% Since Last Earnings Report: Can It Rebound?

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  • BKNG

A month has gone by since the last earnings report for Booking Holdings (BKNG). Shares have lost about 10.9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Booking Holdings due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Booking Holdings Q3 Earnings Beat Estimates

Booking Holdings reported non-GAAP earnings of $37.70 per share in third-quarter 2021, beating the Zacks Consensus Estimate by 19.5%. Further, the figure jumped from $12.27 reported in the year-ago quarter. Also, it compares favorably with the loss of $2.55 per share in the previous quarter.

Revenues of $4.68 billion surpassed the Zacks Consensus Estimate of $4.16 billion. The top line improved 77% year over year on a reported basis and 76% on a constant-currency basis. Further, the figure grew 116.5% sequentially.

Substantial improvement in its booking trends was a tailwind. The company experienced solid momentum in Europe in the reported quarter.

Booking Holdings witnessed growth of 44% in rental car on a year-over-year basis. The company also experienced 154.8% year-over-year growth in the airline tickets unit in the reported quarter.

Booked room night number, which was 183 million in the third quarter, surged 43.9% from the prior-year quarter.

The company witnessed strong growth across its agency, merchant, and advertising and other businesses in the reported quarter.

Although the pandemic persisted as a headwind, Booking Holdings witnessed improvement in travel demand in many parts of the world, owing to the removal of travel restrictions and the ongoing vaccination drives.

Top Line in Detail

The company generates the bulk of revenues from international markets, wherein the agency model is more popular. This is reflected in the merchant/agency split of revenues, which was 34.7/61.3% in the third quarter (the previous quarter’s split was 30.6/61.5%).

Merchant revenues were $1.62 billion, up 93.8% year over year. Agency revenues were $2.87 billion, up 66.4% on a year-over-year basis.

Advertising & Other revenues were $187 million (4% of total revenues), increasing 133.8% from the year-ago quarter. These are non-inter-company revenues from Kayak and OpenTable.

Bookings

Booking Holdings’ overall gross bookings totaled $23.7 billion, which increased 77% on a reported and 75% on a constant currency basis from the year-ago quarter.

Total gross bookings surpassed the Zacks Consensus Estimate of $22.1 billion.

Merchant bookings were $8.8 billion, up 128.2% from the prior-year quarter.

Agency bookings were $14.9 billion, rising 56.2% from the prior-year quarter.

Operating Results

Adjusted EBITDA in the third quarter was $2.1 billion, up 111% on a year-over-year basis.

Per management, operating expenses were $2.7 billion, up 14.4% on a year-over-year basis. As a percentage of revenues, the figure contracted to 56.9% from 88.1% in the year-ago quarter.

Notably, the company generated an operating income of $2.02 million, which jumped from $315 million in the year-ago period. The operating margin was 43.1%, up from 11.9% in the prior-year quarter.

Balance Sheet

As of Sep 30, 2021, cash and cash equivalents were $11.6 billion, up from $11.2 billion as of Jun 30, 2021.

Short-term investments amounted to $522 million in the reported quarter compared with $501 million in the previous quarter.

At the end of the third quarter, Booking Holdings had $9.89 billion of long-term debt compared with $9.99 billion at the end of the second quarter.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -19.54% due to these changes.

VGM Scores

At this time, Booking Holdings has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, 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 B. 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. 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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