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What's in Store for Booking Holdings' (BKNG) Q4 Earnings?

Zacks Equity Research

Booking Holdings Inc. BKNG is slated to report fourth-quarter 2018 earnings on Feb 27, after the closing bell.

The surprise history has been impressive in Booking Holdings’ case. The company surpassed estimates in three of the trailing four quarters, with average positive surprise of 12.35%. However, the online travel company recorded a negative earnings surprise of 1.54% in the last reported quarter.

Strong Agency Revenues to Drive International Results

Booking Holdings generates bulk of its revenues from international markets, wherein the agency model is more popular. This is reflected in the merchant/agency split of revenues, which was 21.6/73% in the third quarter.

In the third quarter, agency revenues increased 37.9% sequentially and 0.5% year over year. We expect agency revenues to increase in the to-be-reported quarter as well, driven by strength across all its platforms.

Agoda and Rental Cars to Boost Merchant Revenues

Merchant revenues are also expected to grow in the to-be-reported quarter, driven by strength across agoda.com and rentalcars.com. While agoda.com is likely to benefit from discounting in markets, rentalcars.com is expected to ride on continuous operational improvements.

In the third quarter, merchant revenues were up 47.9% sequentially and 53.4% year over year.

Strong Room Night Growth

Room night growth is expected to improve in the quarter to be reported, driven by diverse inventory and brand recognition that tend to balance out the macro uncertainties related to any market, as well as growing competition from local and international players.

Total room nights booked during the third quarter was 201.3 million, which exhibited year-over-year growth of 13.4%. This was driven by strong performance of the company’s direct channel.

For the soon-to-be-reported quarter, Booking Holdings expects room nights booked to grow 9-12% and total gross bookings to increase 6-9% year over year (10-13% on a constant-currency basis).

What Our Model Suggests

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

Currently, Booking Holdings has a Zacks Rank #3 and an Earnings ESP of +0.46%, which is indicative of a likely positive surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Other Stocks to Consider

Here are some other stocks that you may also want to consider, as our model shows that these too have the right combination of elements to deliver a positive earnings surprise in the upcoming releases:

Xencor, Inc. XNCR has an Earnings ESP of +8.86% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Square, Inc. SQ has an Earnings ESP of +5.95% and a Zacks Rank #2.

Gogo Inc. GOGO has an Earnings ESP of +13.60% and a Zacks Rank #1.

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