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Priceline Surprises Wall Street With European Accent

Priceline (PCLN) topped analysts' second-quarter earnings forecasts Thursday as the online travel agency continued to add market share in international markets.

Priceline stock climbed more than 5% in late trading. The Norwalk, Conn.-based company, which trailblazed a name-your-price service, earned $9.70 a share minus special items, up 24% from a year before. That beat by 34 cents the estimate of 27 analysts polled by Thomson Reuters, continuing a recent streak. Priceline beat by 49 cents in Q1 and 23 cents in Q4 2012.

Revenue surged 27% to $1.68 billion, edging analyst views of $1.66 billion.

For the current quarter, Priceline expects to earn $15.30 to $16.30 a share, excluding special charges, on a 23% to 30% revenue rise. The revenue guidance is on the low end of analyst estimates for a sales jump of 29.8%. The midpoint of the earnings range is $15.80, slightly less than the $15.86 consensus forecast.

'Exceeded Expectations'

"The group's business performance exceeded expectations in the quarter," Priceline CEO Jeffery Boyd said in a conference call with analysts after the results were issued. Boyd said he noted strength in Europe by Priceline's Netherlands-based hotel reservations unit Booking.com.

Priceline bought Booking.com in 2005, the first major investment in Europe by a U.S. online travel service. It got into the market when online travel was just taking off there, provided its services in different languages and pioneered the idea of selling discount hotel rooms online.

The company has the biggest inventory of hotel rooms in Europe, adding 30,000 rooms in Q2 alone, according to Morgan Stanley. Booking.com offers a strong value proposition to hotels, with the lowest commission rate.

Morgan Stanley said in a July 8 report that Booking.com boosted its market share in Europe to 47% in June from 45% in February. It said the gain came at the expense of rival Expedia (EXPE), whose share has stayed relatively flat and stood at 13% in June.

For Priceline overall, gross bookings, the dollar value of all travel services bought by consumers, surged 38% to $10.1 billion. They grew 44.1% internationally and 11.7% in the U.S.

Hotel Bookings Climb

"Our international business performed well in all our key markets," CFO Dan Finnegan said.

Global hotel reservations jumped 38.2%. Airline ticket bookings rose 1.8%. Car rental days increased 46.3%.

"Priceline has tremendous momentum going forward," said Ascendiant Capital Markets analyst Edward Woo.

JPMorgan analyst Doug Anmuth said in an Aug. 8 pre-earnings note that he continues to "believe that Priceline is the best-positioned company in the online travel space and will continue to gain share in international markets." He expects strong international bookings growth in 2013, driven by Priceline's Booking.com, Agoda, and Rentalcars.com units.

Anmuth said Europe's macro environment is stabilizing and Priceline still stands to grab a larger share of European hotel nights through Booking.com. Latin America and AsiaPacific also should kick in a greater share of global revenues in coming months.

CEO Boyd noted on the call that summer travel got off to a strong start, boding well for the company's Q3 results.