) is scheduled to announce its third-quarter 2012 results on
November 1, 2012. We witness no movement in analyst estimates in
the build-up to the release.
Priceline's second quarter was quite good, with earnings
beating the Zacks Consensus by 51 cents, attributable to strong
revenue growth, strong international bookings growth, as well as
Revenue for the quarter was up both sequentially as well as
from the year-ago quarter, driven by strong volumes across the
business, with hotel room nights, rental car days and airline
tickets, all growing sequentially. Room nights and rental car
days were also up strong double-digits from last year, although
airline tickets were flat.
The gross margin was also up 402 basis points (bps)
sequentially and 774 bps year over year, attributable to higher
volumes in the international business, helped by better pricing
in the U.S.
(Detailed earnings results can be viewed in the blog titled:
Priceline Shares Feel Macro Pressure
Third Quarter Guidance
Priceline expects total gross bookings to grow in a range of
10-18% year over year, with international bookings growing 12-20%
(up 23-31% on local currency basis) and domestic bookings growing
around 5%. This is expected to yield a year-over-year revenue
increase of 9-15% ($1.63 billion at the mid-point).
Pro forma EPS is expected to be in a range of $11.10-$12.10,
while GAAP EPS is estimated in a range of $10.21 to $11.21.
Agreement of Analysts
Out of the 11 analysts providing estimates, none revised their
estimates for the third quarter as well as for fiscal 2012 in the
last 30 days.
Priceline's revenue has increased double-digits over the past
few quarters and the analysts expect the trend to continue in the
upcoming quarter. They expect a healthy third quarter, with
earnings coming in at the higher end of the guidance, on strong
room night growth, industry data and strong results from
The analysts see potential for accelerated share gains, helped
by the extension of Booking.com and Agoda brands into new
markets. They contend that International bookings growth will
remain strong in 2012 and Booking.com will continue to take
meaningful share of the European hotel market.
However, the analysts remain cautious about the higher
domestic airfares, weakening hotel metrics and overall headwinds
in Europe. They expect third quarter guidance to be impacted by
unfavorable foreign currency movements and macro headwinds.
Magnitude of Estimate Revisions
In the past 30 days, the Zacks Consensus Estimate remained
unchanged for the third quarter as well as for fiscal 2012 at
$11.47 and $28.85, respectively.
Over the 90-day period, the Zacks Consensus Estimate was down
87 cents for the third quarter and by $1.05 per share for fiscal
We expect Priceline to report a decent third quarter, with
strong execution and strength in the hotel business, driven by
share gains and new businesses.
Though the overall trends look extremely strong, we remain a
little concerned about the headwinds in Europe. We also believe
that Airline tickets will likely remain a weak spot due to
continued capacity cuts and price hikes.
Longer term, we believe that Priceline remains well positioned
to sustain its growth as consumers now prefer the Internet for
making travel plans and seek the benefit of discounted prices
offered by ecommerce companies like Priceline, rather than the
time consuming offline ways.
Additionally, Priceline is expected to continue investing in
the business to push growth further and especially to continue
its international expansion strategy. This is likely to result in
some downward pressure on earnings.
Priceline retains a Zacks #4 Rank, which translates into a
short-term Sell rating.
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