) is scheduled to announce its second-quarter 2012 results on
August 7, 2012. We witness limited movement in analyst estimates in
the build-up to the release.
Priceline's first-quarter non-GAAP earnings were better than the
Zacks Consensus by 35 cents, attributable to strong revenue growth,
especially in international, coming from both volume and rate
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 double-digits on a sequential basis. Room nights and rental
car days were also up by strong double-digits from last year,
although airline tickets were flat.
However, gross margin was down 149 basis points (bps) sequentially
due to unfavorable mix but was up 916 bps from the year-ago quarter
due to higher volumes. The operating margin also shrunk in the
quarter due to significantly higher online advertising expenses.
(Detailed earnings results can be viewed in the blog titled:
Priceline Reports Solid Q1)
Second Quarter Guidance
Priceline expects total gross bookings to grow in a range of 26-31%
year over year, with international bookings growing 32-37% (up
41-46% on local currency basis) and domestic bookings growing in a
range of 5-10%. This is expected to yield a year-over-year revenue
increase of 18-23% ($1.33 billion at the mid-point).
The pro forma EPS is expected to be in a range of $7.20-$7.40 while
the GAAP EPS is estimated in a range of $6.34 - $6.54.
Agreement of Analysts
Out of the 10 analysts providing estimates, 1 analyst made a
downward revision for the second quarter as well as for fiscal 2012
in the last 30 days.
Over the same time period, 1 analyst moved in the opposite
direction for the second quarter.
Priceline's revenue has increased double-digits over the past four
quarters and the analysts expect the trend to continue in the
upcoming quarter. They expect a healthy second quarter, with
earnings coming above the consensus estimate of $7.06, 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 believe that Booking.com has been increasing hotel inventories
across North and South America, as well as Asia, and Priceline's
business in these areas is scaling up.
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, there was no change in the Zacks Consensus
Estimate for the second quarter whereas the fiscal 2012 estimate
was down by 4 cents to $29.90 cents.
Over the 90-day period, the Zacks Consensus Estimate was down by 9
cents for the second quarter and by 28 cents for fiscal 2012.
We expect Priceline to report a decent second quarter, with strong
execution and strength across 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
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 exert some
downward pressure on earnings.
Priceline retains a Zacks #3 Rank, which translates into a
short-term Hold rating.
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PRICELINE.COM (PCLN): Free Stock Analysis
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